A Warning About Bitcoin From 'Penny Stocks For Dummies' Author
BOSTON (CBS) - Earlier this week, we spoke with an early Bitcoin adopter who has made millions by buying and selling Bitcoin. You might remember "Hank." He was sounding bullish even after Mt. Gox, the world's largest Bitcoin exchange, shut down.
"Bitcoin itself has been rock-solid through all of this," he said.
But Peter Leeds, author of Penny Stocks for Dummies, begs to differ with that assessment in the aftermath of the Mt Gox Bitcoin fiasco.
WBZ NewsRadio 1030′s New England Business Editor Anthony Silva reports
"The problems were worst with Mt. Gox, but they're prevalent all over the entire culture of digital currency," Leeds told me. "There have been over 30 different thefts of Bitcoin to the tune of over $1 million each time, and none of this money can be recovered."
Leed thinks Bitcoin will simply fade away.
"Bitcoin won't disappear," he says. "It will be around, but in a much more muted form.
"Hank" said banks are not needed with Bitcoin. But Leeds could not disagree more.
"If somebody robs a conventional bank, there are police and regulators trying to get that money back and return it," he says. "If it's a digital currency, they cannot track it down, and cannot return it."
Leeds says that setting the value for Bitcoin is more like the Wild West than not.
"A Bitcoin is worth whatever someone else will pay you for it. It is not backed up by the GDP of another country. It is not backed up by the value of gold," he says. "The problem is, if you have a pile of dirt, and the pile of dirt doubles in price, you're looking pretty good. You're thinking you're a good investor, you tell your friends about it, and maybe they think they should buy a pile of dirt, too. But what are you holding? You're holding a pile of dirt, and I think that's when reality kicks in."
Leeds notes that Bitcoin investors aren't even holding dirt.
"It's a digit on a computer program, and most people, even if they're involved with Bitcoin, don't understand how it works behind the scenes. The concept is there are only 21,000,000 Bitcoin that will ever be created, but there's no way to verify that. When you rob a bank and you get away with it, you're going to rob another one. So far, there have been a lot of robberies, and there is no possible way to recover these funds."