The problem is that anyone who understands this strategy can get the same profit he does without any of the expense.

Say the long-term, fair market value of bitcoins is around $10, and that's roughly where they would be if nobody manipulated them. To push coins above $10, you have to buy above $10. Anyone who understands your strategy can make you take a loss as you do this -- as big a loss as they want. To push coins below $10, you have to sell them below $10. Anyone who understands your strategy can make you take a loss as you do this -- as big a loss as they want.

Now, say you succeed. You push the price down to $7 and some people panic sell. Now, you have to compete with everyone who knows what you're doing for a share of the underpriced bitcoins. You have no special way to hog them. And say you push the price up to $13 and some people still buy. Now, you have to compete with everyone who knows what you're doing for a share of the better sale opportunity. You have no special advantage over everyone else.

Now, despite all this, you might still think you could make a profit. Maybe, because you know when and how much you're going to manipulate, that gives you an advantage. But the problem is this -- the further the price is from its natural price, the more it costs to move it and the easier it can return to its natural price. So while going from $10 to $11 might not be that expensive, going from $11 to $12 is much, much worse. Not only do you take twice as much loss on every bitcoin you buy. But more people catch on that the price is significantly higher than it should be and more people are induced to sell.

I personally know several people who are just waiting for such a manipulation to be attempted and have the funds to profit from it. Any manipulator will have to make them as rich as he makes himself, and he will bear all the costs.

Many have tried this strategy. Billions have been lost.

Thanks. I do have a large, flat forehead and people have frequently made those kinds of jokes about it. That picture does accentuate it though. It's not quite as dramatic as it seems in that picture.

I think I'll switch to the picture from Bitcoin Magazine. That was taken by son, and is a typically awful picture of me. But some kind of magic was done to it before publication that makes me look awesome. (Though you can't tell that I'm wearing a Bitcoin Miner T-shirt.)

Update: Done. 

That would be an incredibly generous gift to everyone who currently holds BTC.

Could you perhaps address the arguments I actually made rather than restating my specific arguments as vague generalities.

Let's try it again:

"Every legitimate investment provides the investor with some way to reasonably confirm that the money invested is actually used as promised and that both claimed profits and claimed losses have in fact been earned or incurred as claimed."

Do you agree or disagree with this statement?

Do you have any evidence to suggest that Pirate is buying the debt rather than selling it? It's clearly much more in his financial interest to be selling his own debt than buying it (selling it yields him money, buying it costs him money), and I've seen no evidence to suggest that's he's taking the loss profitable route.

Look at what the Internet has done for information distribution. Today, even the world's most repressive governments are finding it almost impossible to keep their people from reading media from around the globe and sharing their experiences with the rest of humanity. This is having a profound pro-freedom effect around the world today. Humanity has taken a giant step forward.

Distributed, decentralized currencies like Bitcoin will do the same thing for finances. Today, many people around the world are essentially held hostage by government-controlled currencies. The government can control who can produce new currency and how much and can impose tight regulations on how money is stored and transferred. However, systems that evolve from Bitcoin will almost certainly change this in the next 40 years or so. The rich and powerful will not be able to use governments to control who can create money, how much they can create, how it can be transferred, and so on.

People will soon be as free to store and exchange money as they wish as they now are to exchange information.

That's only because you know that it's not in your interest to publicly come to the only possible conclusion.

Good, so do you agree with my conclusion? Or do you think there's some error in my reasoning?

So do you agree that anyone who invests with you is a fool? You agree that it sounds too good to be true. And you agree that no externally available evidence suggests otherwise. Wouldn't you agree that someone would have to be a fool to invest under those circumstances?

But wouldn't you agree that so long as there is no such proof, investing would be absolutely foolish?

I agree that it's impossible for you to be objective. If you were objective, you'd have to admit that every rational investor would conclude you're most likely scamming and wouldn't invest with you.

Whether or not you think I'm being objective, I'm at least documenting the reasons for my conclusions. You have yet to explain where you think I'm in error when I say that only a fool would invest under the terms you are offering. And, unlike you, I personally have nothing to gain or lose either way. In fact, if you were making persuasive arguments, I'd have every incentive to agree with you because claiming you are a scam, should you later be shown not to be a scam, harms my reputation. And my reputation is all that I have at stake. Unlike you, who have a financial stake.

Read over the statement. I don't think it does. I'm not saying all investments are equal. I'm saying we've seen obviously absurdly bad investments that people have taken seriously and been willing to invest in. I believe that indicates a serious problem in the community.

There is nothing inherently different in those two. Either of them could be perfectly legitimate if there's transparency. Both of them are bad investments if there's not. Investors should be careful with both such business plans.

What exceptions are there to the rule that an investment with no transparency or that promises suspicious return relative to risk is almost certainly a scam? (Or, in the rare case where there really does seem to be an unusually good business plan, must at least be evaluated with extremely heightened suspicion to ensure it's not a scam.)

Except several people are asking that, including me.

I don't. That's not what I'm saying. I'm saying that you haven't committed to doing that. With legitimate investments, the investors know what they're investing in so they can assess the risks and assure themselves that both profits and losses are legitimate.

It's too late at that point. If you say, "Sorry, I lost all your money. I said it was high risk. I went to Vegas and put it all on black. Here's proof I did that," what can an investor do? Of course if they knew you were going to do that, they never would have invested.

Except the explanation is totally implausible and totally unverifiable. Every Ponzi scheme has an explanation of how they are going to make money. They're often implausible and always unverifiable.

To date, every single HYIP has proven to be a scam. And I do not believe an honest person would pitch a legitimate scheme in such a way that only a person who would fall for a HYIP scheme would invest in it.

Let's say, for the sake of argument, that your scheme is totally legitimate and you really do have some incredibly way to make money that you must keep secret for it to work. Of course, there is no way anyone can verify this. So anyone who would invest in your scheme would also invest in an identically pitched scheme that was a Ponzi scheme. And since every HYIP to date has proven to be a scam, the odds that yours is a scam, as estimated by a reasonable investor, have to be somewhere around 99.99%. It is a pretty incredibly stupid thing to invest in a Ponzi scheme -- we all know that the average such investor must lose money. So you are intentionally pitching an investment that you know only an idiot would invest in. Personally, I can think of only one reason you would do that.

Well, women may be disadvantaged over men because they can't control their urges, but at least they can "shut the whole thing down" in cases of "legitimate rape".

Don't you wish someone had warned people that something like this would happen?

It's an *obvious* scam. If for no other reason, because there is absolutely no way to verify if a claimed loss is due to any actual investment loss or not. That one factor alone is enough to label an investment a scam.

There is no legitimate investment where you go to the guy you invested with and he can say, "Oh, I'm sorry, your investment lost money", and that's all he tells you. In *every* legitimate investment, when a loss it taken, the investor has some kind of explanation of how the loss was incurred, evidence that the funds were actually invested in something that had a legitimate expectation of earning a profit, and so on.

Or, alternatively, they are inherently advantaged because they have the option to become pregnant and men have no such option. A woman does not have to become pregnant unless she believes the advantages outweigh the disadvantages.

I think either he's crazy, he has a backer, or he has a crazy backer. Or maybe he's hedging. Or maybe he has a backer that's hedging. Or maybe he's a true believer.

Personally, I find it baffling. In any event, assuming he doesn't default if he loses, he can do what he wants with his money. It has certainly made this entire event an order of magnitude more entertaining. For that I thank him.

In any event, I don't think many people have enough facts to make a real judgment as to whether this is Matthew being a genius, Matthew being an idiot, or something in the middle. We'll find out eventually, I think.

Now I'm going to go get some more popcorn.

Update: MNW has denied having a backer.

Update: I think I figured it out! MNW has invested millions in popcorn futures.

On the other hand, owning a portion of a gambling business that violates the laws of any State in which it conducts business is.
http://www.law.cornell.edu/uscode/text/18/1955

In general, the two main reasons for a company to issue public stock are:

1) To raise capital without having to put cash flow at risk or at better rates than you could otherwise get with an unsecured loan.

2) To establish a consensus value for your company to allow investors to cash out when that meets their personal financial goals without having to find private buyers, go through due diligence, and so on.

No, because that's not a very serious risk. Nobody has a large incentive to put a cougar under my bed. But if they did, then it would be something I'd be worried about.

Name-calling is not a substitute for an argument. Do you agree with me that it's in Pirate's self-interest to do this?

We are used to people basically being honest because we have built a society in which deception is generally punished. When you're in a situation where deception would clearly be extremely profitable, it's unreasonable not to seriously consider the possibility that you are being deceived. That's not FUD, it's just the way the world really is.

The fact is that Pirate personally comes off much better if he doesn't pay back his obligations and sells his own debt. The only reasons for him not to do that are personal honestly, fear of reprisals, and the value of his reputation. It's not FUD to say those factors should be weighed against the profit he stands to make.

It's also not FUD to point out non-obvious risk factors. Prior to my pointing it out, I'm not aware of anyone who pointed out that it's in Pirate's financial interest to *sell* Pirate debt.

If you can win a thing of value in a game of chance, it's a lottery.

You can if you can pay less than 50% for Pirate debt. Say you buy 100 BTC of pirate debt for 40 BTC. You place a 40 BTC with Matthew:

1) Pirate defaults. Matthew pays you 40 BTC. You paid 40 BTC for the debt. You break even.

2) Pirate pays you 100 BTC. You pay Matthew 40 BTC. You paid 40 BTC for the debt. You made 20 BTC.

Apparently, some Pirate debt is going for less than 50% of face. So either nobody's doing this or the difference between 50% and the going rate is the chance Matthew will default.

I disagree. The possibility that Pirate might be *selling* Pirate obligations is very, very different from every other case. Only Pirate (or someone conspiring with him) could sell an obligation that he acquired at zero cost and knew for sure was worthless.