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The self-regulatory organization FINRA and the North American Securities Administrators Association have issued investor alarms about bitcoin.177178
An official investigation into bitcoin traders was reported in May 2018. The U.S. Justice Department launched an investigation into potential price manipulation, including the techniques of spoofing and wash trades.180181182 Dealers in the U.S., the U.K, South Korea, and possibly other countries are being investigated. Brett Redfearn, head of the U.S.
The U.S. federal investigation was motivated by concerns of potential manipulation during futures settlement dates. The final settlement price of CME bitcoin futures contract is determined by prices on four exchanges, Bitstamp, Coinbase, itBit and Kraken. Following the initial shipping date in January 2018, the CME asked extensive detailed trading information however a few of those exchanges refused to provide it and afterwards provided only limited data.
Academic research published in the Journal of Monetary Economics concluded that cost manipulation happened during the Mt Gox bitcoin theft and the marketplace remains vulnerable to manipulation.186 The history of hacks, fraud and fraud involving bitcoin dates back to at least 2011.187
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Research by John M. Griffin and Amin Shams in 2018 suggests that trading associated with increases in the amount of the Tether cryptocurrency and related trading in the Bitfinex exchange account for about half of the price increase in bitcoin in overdue 2017.188189
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J.L. van der Velde, CEO of Bitfinex and Tether, denied the claims of price manipulation:"Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation. Tether issuances cannot be used to prop up the amount of bitcoin or any other coin/token on Bitfinex. "190
The Bank for International Settlements outlined several criticisms of bitcoin in Chapter V of their 2018 annual report. The criticisms include the lack of stability in bitcoin's price, the high energy consumption, high and variable transactions costs, the bad security and fraud at cryptocurrency exchanges, vulnerability to debasement (from forking), and also the influence of miners.191192193.
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The Economist wrote in 2015 that these criticisms are unfair, predominantly because the unethical image may induce users to forget the capacities of their blockchain technology, but also due to the fact that the volatility of bitcoin is changing in time.194
Bitcoin and other cryptocurrencies have been identified as economic bubbles by at least eight Nobel Memorial Prize in Economic Sciences laureates, including Robert Shiller,195 Joseph Stiglitz,196 and Richard Thaler.19713 Noted Keyensian economist Paul Krugman wrote in his New York Times column criticizing bitcoin, calling it a bubble and a fraud;198 and professor Nouriel Roubini of New York University known as bitcoin the"mother of all bubbles. "199 Central bankers, including former Federal Reserve informative post Chairman Alan Greenspan,200 investors such as Warren Buffett,201202 and George Soros203 have stated similar views, as have business executives such as Jamie Dimon and Jack Ma.204.
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Bitcoin has been criticized for the amount of electricity consumed by mining. As of 2015update, The Economist estimated that even though all miners used modern facilities, the combined power consumption would be 166.7 megawatts (1.46 terawatt-hours per year).133
At the end of 2017, the worldwide bitcoin mining activity has been estimated to consume between one and four gigawatts of electricity.205 Politico noted that the even high-end estimates of bitcoin's total consumption levels amount to only approximately 6% of the entire energy consumed by the international banking sector, and even if bitcoin's consumption levels increased 100 fold from the current levels, bitcoin's consumption would still only amount to about 2% of international electricity consumption.206.
To lower the costs, bitcoin miners have set up in places like Iceland where renewable energy is economical and cooling Arctic atmosphere is free.207 Bitcoin miners are known to utilize hydroelectric power in Tibet, Quebec, Washington (state), and Austria to decrease electricity prices.206208209210 Miners are drawn to providers like Hydro Quebec that have energy surpluses.211 According to a University of Cambridge study, a lot of bitcoin mining is done in China, where electricity is subsidized by the government.212213.
A variety of journalists,207214 economists,215216 and the central bank of Estonia217 have voiced concerns that bitcoin is a Ponzi scheme. In 2013, Eric Posner, a law professor at the University of Chicago, stated that"a real Ponzi scheme takes fraud; bitcoin, by contrast, seems more like a collective delusion. "218 A 2014 report by the World Bank concluded that bitcoin was not a deliberate Ponzi scheme.219:7 The Swiss Federal Council220:21 examined the concerns which bitcoin might be a pyramid scheme; it concluded that,"Since in the example of bitcoin the normal promises of profits are lacking, it cannot be presumed that bitcoin is a pyramid scheme." In July 2017, billionaire Howard Marks referred to bitcoin as a pyramid scheme.221.