In the past 24 hours, bitcoin price has surged from a low of $380 to a high of $490 earlier today. Overall, the cryptocurrency has increased by more than 70% over the past three months. While the news for bitcoin proponents, supporters and users is certainly welcome, there is a growing concern that the currency is entering another bubble.
Earlier today, the Financial Times published a report suggesting that a particular person might be behind the price increase, former Russian government official and felon Sergey Mavrodi. The Chinese Social Financial Network MMM is run by Mavrodi, and allows people to transfer money to others with immediate financial concerns with the promise of an enormous monthly return. It’s a classic pyramid scheme that has caught on in many nations, including China.
MMM was founded in 1989 and started its ponzi scheme in 1994. Through use of an aggressive ad campaign, MMM was bringing in extravagant returns until it was shut down for tax evasion in July, 1994. However, Mavrodi was elected to the Russian State Duma (lower house of the Russian legislature), though his right to immunity was rejected. Mavrodi was eventually arrested in 2003 and convicted of fraud in 2007. He served a four-and-a-half-year sentence.
So how is all this tied to bitcoin? First, it’s important to understand how Mavrodi promotes MMM to the public. He explains that we all live in a slave economic society that promotes dependence on money. According to Mavrodi, people do not need a lot of money to survive, and MMM serves as the place for people to find money when it’s needed. MMM requires participants to have their own unique bank account or bitcoin wallet. That MMM has gone viral in China can help explain the higher bitcoin volumes of recent months.
Of course, there are other reasons behind the rise in bitcoin’s price, particularly concerning the volume coming out of China.
Techradar explains that China has capped the cash withdrawals citizens can make overseas. There’s reason to believe, therefore, that this cap has led to citizens turning to other means (i.e. bitcoin) for overseas financial access.
BitGo engineer Jameson Loop told Techradar that Chinese exchanges have inflated their reported volumes in the past. Therefore, current volumes cannot be fully trusted.
At the time of writing of this article, bitcoin hovered around $470.
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