How to become a Bitcoin millionaire

• Who invented Bitcoin? Most websites I have seen give credit to Satoshi Nakamoto. a mysterious Japanese programmer who is no longer involved with the project. Nobody seems to know who is behind bitcoin and that makes me suspicious. Bitcoin has been linked to the founders of the Silk Road. Would you really put your money into an investment that carries the taint of drug dealing?

• There are numerous websites that claim that Ben Bernanke has been discussing with the Fed how to integrate bitcoin into the broader economy. Why would he do this? The United States have been involved in a war on terror since 2001. What on earth would lead the US to sponsor a currency that can facilitate hidden payments. Typically payments are hidden by people with something to hide. Before you buy a single bitcoin I would encourage you to search for Bernanke's thoughts on the subject on the Federal Reserve website. Couldn't find them? Neither could I.

• Is Bitcoin safer than traditional currencies? This question has two levels. A traditional currency has the support of a real economy with real GDP and interest rates. It fluctuates as market conditions dictate but when the market gets a little out of hand you can expect the central banks to maintain stability. Bitcoin does not have the support of an underlying economy or a government. It does not earn interest and will not be bailed out by a central bank. If we narrow our focus down to the individual level we read that Bitcoin wallets can be hacked or lost. If you lose your bitcoins they will be buried in the code somewhere and you can't get them back. Banks will generally investigate suspicious transactions and will generally refund monies lost to hackers and fraudsters. Can somebody please give me the number for the bitcoin investigations department?

• Is Bitcoin a secure method of payment? Lets consider this. Bitcoin can be traded face to face however there have been a small number of rip offs reported. Fine this can happen with regular currency. In most jurisdictions money exchangers need to be licenced and adhere to regulation. This is not the case with your friendly face to face bitcoin dealer. Where is the price discovery?

• Bitcoin is a tradeable commodity. I would question this on the grounds that the price is far from transparent and the latency of online trades is about 10 minutes. The professional markets have latency of fractions of a second. 10 minutes can and will bury you in a hostile market. Once again, professionals can turn to Reuters, Bloomberg and any number of independent pricing sources. Where is your bitcoin trading data coming from?

1. Invent an “asset” and promote it as a safe haven during a time of extreme economic crisis. Do this at a time when where the major currencies of the world are in a state of aggressive competitive devaluation in an attempt to put liquidity to weak economies and to strengthen investor confidence.
2. Make the asset trendy. What is more trendy than a high tech electronic currency?
3. Whilst we are at it take out those pesky central banks and regulators they are not going to tie this currency down.
4. Add some mystery to your new currency by having a reclusive “inventor” who has had no control or involvement over the currency in over three years and make it clear that the new currency cannot be manipulated without the involvement of your entire user base.
5. Give the asset some street cred by putting up websites that talk about how the central banks are debating the use, development and integration of the new asset into the financial system.
6. Give the currency a finite supply which means that the more people you get on the higher the demand. About 1 for every 343 people in the world’s population should do it.
7. Ensure the internet is awash with stories of people turning $27 into $1,000,000 in a few years.
8. Are you short a bit of computer power to process the algorithms that facilitate your currency? Enrol a large portion of your investor base to willingly providing their computing power to run your system. All you need is a carrot. Perhaps if you pay them small amounts of your “currency” randomly? You could call the process “mining” to make it more of a game.
9. Make the currency tradeable online, by mobile phone, face to face or even put a few ATMs in.
10. Finally and most importantly you need an exit strategy. Sell down slowly but make sure you have sold your stash before the whole thing goes crash.

Not at all. Asset bubbles have emerged since the dawn of currency. Before you buy Bitcoin you should read up on Tulips, South Seas Trading Co, Poseidon Nickel, Dot Coms bubbles etc.

Unlikely assets have promoters both of the cunning and the gullible variety. The promoters spread the word to the point where a buying frenzy develops the constantly rising prices drag more and more speculators in to get a slice of the action. Eventually this reaches a tipping point where further price rise is no longer possible. This could be because certain speculators will have borrowed funds to get in and they are unable to tolerate even a minor loss. A pullback creates forced selling and the waves of optimism that inflated our market becomes an endless torrent of despair as more and more speculators cut their losses.