Bitcoin and some possible dangers!
There are about 16 million bitcoins currently in circulation. Out of which about 40 percent is perhaps in the hands 1000 users. These users could even be proxies for a smaller group of individuals.
People who own a large amount of bitcoin are know as whales. These people can act as a cartel that controls the price of bitcoin. These people are analogous to the OPEC cartel which control the oil prices across the world.
They can send the prices of bitcoin plummeting by selling a portion of their holdings. Most of these people started off when bitcoin was still at its infancy. There is a possibility that these bitcoin elites have known each other since they are the oldest players in the market for bitcoin.
Since there are no rules to regulate trading of bitcoin, if a group of bitcoin whales agree to buy enough of bitcoins to push the prices up; there is no one to stop them.
Rumors also contribute to increase in the value of bitcoin. In securities, this might count as well as fraud.
Early this year rumor spread that, amazon is going to accept bitcoin as a payment, following which the value of bitcoin sky rocketed, then it came back crashing down to the earth.
Now that the value of bitcoin has increase manifold compared to its initial offering. Now it would be a good time for the whales to unload their bitcoins to the market and make a huge amount of profit. This can in turn drive the market prices down and cause trouble for the smaller players.
As long as the market for bitcoin is unregulated, there is always a greater possibility for fraudulent activities. You should be vigilant before you invest.
