Bitcoin: 2014 Fraud Warning and $4,230 Valuation in 2017

Bitcoin: From Pyramid Scheme to $4,230

In February 2014, hackers stole 750,000 bitcoins, representing 6% of the currency's total circulation. The European Banking Authority warned of consumer risks, while Funcas stated that no entity guaranteed the recovery of deposited funds. The price, they argued, depended on future buyers. Three years later, such buyers emerged: in November 2017, Bitcoin traded at $4,230.

What peine to the 750,000 bitcoins stolen in 2014?

The February 2014 theft was not an isolated accident, but the system's first serious test. EU authorities emphasized then that the currency was unbacked, its price was as volatile as a weather vane, and its value rested on the faith of subsequent buyers. Javier Alonso, Director General of Operations, Markets and Payment Systems at the Banco de España, detailed the technical issuance: mining, solving a mathematical problem for each transaction and distributing new bitcoins to the fastest computer.

For skeptics, the issue is not the algorithm: it is that there is no authority behind it. No one signs the backing. If money vanishes, there is no counter to claim it. This void is both the warning and the sales pitch.

Why did the fraud warning not crash the price?

Because the warners had, according to defenders, an obvious conflict of interest. The recurring reasoning is that central banking sees cryptocurrency as direct competition to its issuance business, so any institutional warning is read as free advertising. Some argue that the only way to succeed with this asset is to do exactly the opposite of what the regulator recommends.

The numbers, for now, lent credence to this thesis. From the start of the debate until November 2017, the cumulative revaluation was estimated at 913%, and those who entered in March of that same year had already gained 274% in a few months. Any prudent analysis was eclipsed by the chart.

Is it a pyramid scheme or stateless money?

Here the issue splits into two irreconcilable waters. On one side, those who compare the scheme to classic savings collection cases: users assuming all risk with no entity to approach, promises of indefinite revaluation, and a structure that only holds while new money enters. References to Afinsa and Forum appear repeatedly, with the warning that latecomers often end up holding the bag.

On the other side is the pure monetary argument: cryptocurrency serves to protect wealth from the constant devaluation of fiat money, just as was done with gold or silver before. It is recalled that illegal activities are paid mostly in official currencies, not bitcoins. The comparison with Dutch tulips is also used, though in the opposite direction: if a valuable bulb today may be worthless tomorrow due to a mere change in taste, anything can be merchandise.

Do you have to declare bitcoins to the Tax Agency?

Yes, and almost everyone agrees, albeit for different reasons. Selling and converting to euros is perfectly legal, but generates obligations: gains are declared in the IRPF (Personal Income Tax), and the applicable rate ranges between 19% and 23% of the profit obtained. Accumulated holdings over the years also fall under the wealth tax.

The uncomfortable point arises when someone sells and withdraws a million-figure sum: the money is legal, but traceability fails. This is the loophole where money laundering and extortion enter. An FBI report cited in the discussion placed the ransomware business paid in this currency in the billions by mid-2016.

Exchange liquidity, the point no one closes

The sharpest disagreement concerns the exit. One sector warns that exchange platforms have no cash to cover even 1% of the value of the bitcoins they hold: they process small, symbolic withdrawals, but anyone who becomes a millionaire will face a nasty surprise when claiming their money. This is the thesis of infinite trust and a digital bank holiday.

On the other side, they respond that orders are executed instantly, that they have been buying and selling for years without incident, and that no one has shown a single failed transaction. Liquidity is not demonstrated with old examples, they say, but with a real withdrawal attempt.

What happens if tomorrow all Bitcoin holders decide at once to check how much of that value is money and how much is faith?