Reuters: Bitcoin, the same story as the 1996 Albanian flluska

In financial bubbles, the end is very close when amateurs start becoming experts.

In 1929, when stock markets were overrated, almost all companies were profitable. In contrast, there is little support for electronic coins like Bitcoin.

Actually, there's a story in that. At a future time, government-backed currencies will emerge from use, while computer networks will remain Stoic. So people who want to use dirty money will rely on these software. Other coins based on these technologies will be highly valued, as much as no current price is too high.

After three decades of global deflation without valuable deposits in consumer banks, this story makes no sense. Even if we take criminal transactions to base, it would be the weakest excuse for these crazy investments since the pyramids in 1996 in Albania.

In that year, the Balkan state was involved in a mad vortex to put money in these “investment funds”. These were classic Ponzi schemes. They promised returns of up to 30 percent a month, and they would continue as long as they collected enough money to repay what little they wanted to sell.

The growth was dynamic. In just a few months, the funds were estimated nearly half as much as the country's Brto Interior Production, according to the International Monetary Fund, according to a study published in 2000. Individuals sold homes and savings to put money in investment funds.

Everything exploded in 1997, creating population unrest. The government fell, and the civil war broke out. The IMF estimates that some 2,000 people died in those riots. A new government was established, as well as monetary order, but GDP dropped 11 percent in 1997, and did not fully recover for the next five years. In 2001 alone, GDP growth rates would be restored to the level prior to pyramid mania.

Albanians who participated in the funds, no doubt, were greedy and foolish. Still, even after 40 years under the communist regime, citizens can be forgiven for not understanding how financial markets function. Furthermore, the government, post-communist, did nothing to erase the illusions of those months.

The buyers of bitumen and her sisters need to be ashamed. They are certainly not poor, and ignorance is not justified. With a little more deepening, potential buyers can clearly see that this market is a promotion of the Ponzi scheme. No one is selling anymore, and the new buyers are no longer asking about the price.

The growth of Bitcoin on the end of 2017, has increased by about 24 per month, has brought much concern. Like the Albanians before them, cryptodollar speculators have responded to instincts to gain a lot of wealth. Technically, they remain rational creatures, but greed is beyond good judgment.

There are two differences between Albania and crypto notes. First, the current insane growth has stimulated the creation of a rapidly and sophisticated commercial infrastructure that the tyrannical people would find difficult to imagine.

Second, cryptocle collapse is less harmful. The current market of 30 main funds was more than $640 billion on January 3rd, according to the coinmarketcap.com. This is a very high value to pay, almost 1 percent of global GDP.

Recent climbing speed should ensure that the amount of borrowing, provided by the value of these assets, essentially worthless, is only a small part of their nominal value. When prices drop, bad loans tend to cause much of the damage.

However, like the 1996 Albanian mania this episode proves market-based financial failures. Sometimes greed only produces foolishness.

/Reuters/