Painful Truth: Albania’s war holds lessons for bitcoin investors

Wherever you have an unregulated market, you’ll get scammers.

This column is about bitcoin, but first we’re going to talk about the Albanian Civil War.

Back in 1991, communist governments across Europe fell apart like the engine on a Lada. Albania’s citizens had been even poorer and more isolated during the Cold War than most of their neighbours – they sided with Mao during a dispute between China and the Soviet Union, leaving them as outsiders twice over.

But hey, things were looking up! There were democratic elections, and the chance to transition to an economy not based on bread lines and building hundreds of concrete bunkers.

Then the con artists materialized.

Over the next six years, the entire economy of Albania was slowly consumed by a series of ponzi schemes and pyramid schemes.

Some of them seem to have started as actual businesses – smuggling guns and oil into the former Yugoslavia in violation of wartime sanctions, for example. Others were scams from the start.

But they promised huge returns! Double your money in a year! In six months! In one month!

Money flowed in. A small-town soccer team outside the capital suddenly had the cash to hire a celebrity Argentinian coach. New millionaires flaunted their wealth with cars and new construction.

Then in late 1996, the schemes imploded, over the course of just a few weeks.

In all, two thirds of Albanians invested in one of the schemes. It sucked more than $1.2 billion out of an impoverished country of 3.5 million people.

Then the country went boom.

The “civil war” was a period of unrest that involved conflict between angry locals, the government, opposition politicians, and ruthless gang leaders. Armouries across the country were looted and virtually every adult had a gun and ammo. About 2,000 people died.

That’s the grimmest story I know about raw financial malfeasance.

What does this have to do with bitcoin?

Ponzi schemers were attracted to Albania because of two factors.

First, the population was staggeringly naive about finance or investing, which had been essentially non-existent for the previous 50 years.

Second, because their new government was likewise naive, there were no financial controls or law enforcement agencies capable of putting the brakes on the scams.

Bitcoin is a cryptocurrency – an online money system based on strong cryptography and a distributed ledger controlled through a piece of software called a blockchain.

Cryptocurrencies were created specifically to allow their users to avoid government entanglements, like, y’know, paying taxes or following laws.

Bitcoin was the favoured payment method on a large number of darknet web sites like Silk Road, for instance, where people bought and sold mail order drugs.

So we have a lack of government oversight, already baked in.

Then we saw the astonishing rise in bitcoin – and other cryptocurrenncies dubbed “altcoins” – value over the past few months. That drew thousands of people from around the world to invest. Hey, the value was just going up, right?

(This was happening despite the fact that the more people who want to use them, the more difficult buying and trading with bitcoin becomes, due to software problems.)

And right on schedule, we find that some coin exchanges and even some entire altcoin offerings are being accused of being ponzi schemes.

Last week, bitcoin took a massive hit to its hugely inflated value. It’s now yo-yoing wildly up and down. At one point, it had lost more than 50 per cent of its peak value.

Fortunately, bitcoin and the altcoins are being purchased by a widely distributed customer base. Their increasingly likely fall will not spark gun-crazed ex-communists to take to the streets looking for someone to blame.

They’ll just wipe out the usual suspects – a few rich idiots and a lot of poorer folks who got suckered by the promise of easy money.

In the end, it’s just Albania, all over again.

Just Posted

Hells Angels invited to rally by anti-SOGI organizer

The Culture Guard group has helped Hells Angels in the past, said its executive director.

Langley foot race blends love of running and animals

Cat mom and long-time shelter volunteer speaks to excitement for Sunday run.

Langley’s L.J. Tidball debuts and wins in Mexican Nations Cup

As one of four Canadian riders, a local show park owner helped secure the country’s victory.

Demolition suggestion outside role of inspector: Fraser Health

Letters on Fort Langley buildings say they are rat and vermin infested.

HOCKEY: Players have all been touched in some way by cause

Langley charity hockey team chooses to donate to BC Children’s Hospital.

Police release criminal profile of suspect in Burnaby teen’s murder

Marrisa Shen was found dead in a Burnaby park last summer

Aldergrove youth soccer ‘springs’ into action

Aldergrove Youth Soccer kids sprang into action Monday evening on first spring-like day of the year

‘Rusting in Peace’

Langley Quilters turn art into quilt for 2018 show

Doctor sees healing power in psychedelic plant as Peru investigates death of B.C. man

Peru’s attorney general has ordered the arrest of two suspects in the killing of 41-year-old Sebastian Woodroffe

Toronto police officer ‘gave himself the space and time’ in van attack

Footage shows officer standing up, turning off his siren and talking clearly to the suspect

$1.18 to $1.58 a litre: Are you paying the most for gas in B.C.?

Gas prices across B.C. vary, with lowest in Vernon and highest in – you guessed it – Metro Vancouver

EDITORIAL: Speaking out for sexual identities

Both sides of SOGI debate for B.C. schools show signs of bravery, but not all are heroic

B.C. hockey team to retire Humboldt Bronco victim’s number

BCHL’s Surrey Eagles to retire Jaxon Joseph’s No. 10 in light of bus tragedy

OUR VIEW: Vaisakhi cleanup puts pot partiers to shame

Half a million people attend parade in Surrey and in its wake, things are cleaned up within 10 hours

Most Read