Topic: Why bitcoin indeed "looks" like a Ponzi scheme (Read 590 times)

Now that we are most likely done with Bitcoin being a drug money and Bitcoin is a bubble we are now seeing Bitcoin more often as the biggest ponzi scheme created by a person, and if that is their way of thinking then Bitcoin as a ponzi scheme is the most successful out there and the only ones losing money are the ones who don't have the guts to take a hit or two in their losses. There are 2 kinds of people participating in the corrections the ones who are selling due to the price drop and the ones who sold at the top and buying it after when it has bottomed out, the latter are the ones who are benefiting from the most successful ponzi scheme out there. And like always it will fade in the past as Bitcoin always prove their haters wrong.

The Ponzi scheme is an investment fraudulent activity that pays profit to investors from their own money, or money already paid by the previous investor, and not from the profits earned by each individual running the business. The Ponzi scheme is designed to crumble at the last investor funding when the number of new participants is not enough. Bitcoin is a software project without central authority. Consequently, no one can cheat with regard to investment profits. Such as major currencies in general such as gold, the United States dollar, euro, yen, etc. there is no warranty on the ability to buy and free exchange rates. This leads to volatility in which bitcoin owners can immeasurably gain or lose money. Beyond the speculation factor, Bitcoin is also a useful and competitive payment system that is being used by thousands of users and businesses.

IMO the reason people think bitcoin is a ponzi scheme is because they dont understand or dont want to understand how it works and what it was invented to do. It is ignorance.

To those who dont understand bitcoin is created from nothing, it is nothing because there is nothing physical.
It probably looks like the actions of pump and dump schemes to them.

It does have some similarity to ponzi schemes as its value looks like depends on the number of people participating in it. The biggest difference is that ultimately a ponzi scheme has to real value behind it, while bitcoin has its technology giving it value. A ponzi scheme is just air while btc is a full blown technological disrupt.

It doesnt matter if bitcoin isnt what it's intended to be. It doesn't have to be a "currency" to achieve its purpose that is to change the banking system. Right now, its pointing to become "digital gold" and that is not at all bad. It wont be a currency because it'll be too valuable to trade but that doesnt give it any less power against centralized banks.

That’s because you choose Ponzi scheme as your reference to Bitcoin. I have to agree that the vision of Satoshi never came to realize into what is its original purpose but at least it became influential to revolutionize the financial system.

But honestly I can’t allowed myself to refer BTC into like Ponzi scheme because BTC is created with the purpose of liberating people out of the original financial system while the other was created out of fooling the people.

Ponzi in its own roots. Crypto promises investors yield way above their initial stake. High level of bitcoin selling and buying is what causes btc volatility and therefore insecurity. btc story will last as long as enough people buy fiction that btc represents real value.

This is why it has been unstable so far anyway. The bad thing though is that most investors stepping in now are seeing bitcoin not for what it really is and that is why a lot of people are so eager to get on the train and mainly what I see now are just FOMOs, but how long the FOMOs are going to keep coming is what no one knows.

I would not classify it as a Ponzi though, even if I understand what the OP is driving at. The value may drop, but one thing is, it will end up sustainable in the long run as a result of its real value. You cannot get that from Ponzi.

Well, the 2013 big crash was a real hard drop anyway. On that time people could stop using Bitcoin, but they didn't. If a hard drop happen again people will remember that day and won't fear to continue using Bitcoins.

I believe when nobody new comes to Crypto-Currency world, it will be because all the world's population or a big parcel of this population will be already using it and many different businesses will be already accepting Bitcoin or/and other Crypto-Currencies as payment methods. There will be a use for this, without speculation we can surely see a drop in price, but not enough to "Kill" the currency.

And don't forget gambling industry, it's helping to bring more people into Bitcoins, and not only for the speculative reason, but the recreational one. It's an industry that moves really huge amounts of money on the world.

Sadly I have other occupations for now. But I agree, bitcoin businesses are just starting and there is a lot more to do.

Indeed, for the moment bitcoin is just a speculative products for a large part of the community.

But it goes with the inner concept.. I mean, the early adopters of bitcoin have entertaned other users by promising huge profits... So you cannot prevent people to try to make the most of what may seem to be another financial product!

I hope that one day it will be possible to use bitcoin in real life (actually there are places here and there accepting bitcoin as payment) but.. I think it will not come from large companies. for them, the blockchain is a big problem, as they hide most of their current transaction. Allowing traceability would be the end of their biggest profits.

So if you want to see bitcoin survive... Well, instead of counting on large institutions (against which bitcoin was actually created), try to come up with business ideas. We should count on the community of small users instead of always leaving decisions to bigger actors!

Please I'm not trying to debate wether we should hodl or not. Try to understand my point and stop giving me "blabla is wrong", instead give me other points of view and counter arguments.

Plus, I will repeat myself for the Nth time : I do not consider personnaly consider bitcoin as a simple ponzi.

Bitcoin future may be uncertain at the moment and no one can really know what it holds for it, but classifying it as ponzi is totally wrong. Bitcoin has an intrinsic value and if you do not know that yet, then maybe you need to understand better why the people in Zimbabwe are even buying higher than the normal market value. As long as demand and supply keeps going on, it is definitely going to keep on at the pace it is.

Sure, it may be over-valued, but does anyone really know the peak value? The value there now is what you and I have both created for it and as long as someone still always see a value or usefulness to buy at that price, then it will end up that way, otherwise, just like any other currency it can drop and that is what most people who think it is a get rich quick scheme do not understand.

First I would like to say something to the people saying "duh it was not designed to be anonymous" : you need at least 2 things to establish a transaction (no matter which currency you use or want to create, try it if you don't believe me) : something that designates the emitter and the receiver. You can characterize it with heavy documents (that includes IBAN, name, second name, etc etc...) or with cryptics but uniques IDs (like bitcoin does). As soon as the addresses remains the same, OF COURSE you can not be 100% anonymous (and by the way, some platforms allow to you change your receiving adress at every transactions, and nothing stops you to create multiple changing adresses if you host yourself your wallet). So yes I agree that bitcoin isn't, by design, meant to be 100%, but a bitcoin transaction is still "a lot more anonymous" than a bank one.


Taking the main characteristic is not cherry picking. Plus, as I said several time, I do not consider bitcoin as a ponzi. I just want to help bitcoin enthusiasts to understand that it would (almost, yes, given that I didn't compare it to a strict definition of a ponzi, if you like) be considered as a ponzi-like scheme if you take away trading fluctuations and currency-uses of bitcoin. A more subtle suggestion of mine is that there is no "price recovery". At least none due to the market. When a bubble burst, price fall down. I think we have seen a lot of non major bubble.
It's the new people, coming into the market, that help to make the price rise again (due to the more-or-less ponzi like scheme it induces). Let me take an example : Late 2013, bitcoin isn't known by a lot of people except super early birds. Price rises to 1200$ and falls down to 200$ or so. It takes years to recover. That was the definition of a bubble. Only, unlike now, there was a lot less people in the market. Am I expressing myself right ?



Lol please, don't give me that. I am very well aware of the blockchain algorithm and it's completely unrelated to the fact that we can or can not consider bitcoin (which is an implementation of blockchain) as a ponzi. It doesn't matter how the stock is generated or secured (which is what blockchain does, nothing more. Generate bitcoin and secure transactions).

I will repeat myself again : the main difference, making bitcoin looks like a lot more like a ponzi that forex and every stockmarkets, is that the sky rocketing price is directly correlated with the number of newcomers. Compare the google trend curve to the bitcoin's price, watch the big peaks of newcomers, and you'll see that it's a fact.

People who think bitcoin is a ponzi are those people with small knowledge how the blockchain works.  These are the people who were loss from a ponzi schemes using crypto. If bitcoin is ponzi,  then forex,  stockmarket are also ponzi.

So now, let's not review every definition of a ponzi, instead let's cherry pick details to offer a valid comparison? That's the common theme of every failed thesis paper... Even if you use the main characteristic you just pointed, out, as I said, then every trade of every asset can "look like" a ponzi. That's a poor way to start an argument. Definition is usually the starting point. Clarify it, then go from there.


Bubble symptoms I agree with, in fact, even the most ardent advocate will feel Bitcoin is in a kind of bubble (that doesn't necessarily mean it crashes to zero with every burst) but not ponzi. A ponzi is not a bubble... You might have confused yourself trying to describe a bubble, somehow thinking it looks like a ponzi.

Everything OP said accurately describes every price increase that ever happened in the stock market. Is it fair to say amazon, microsoft or apple stocks are ponzi schemes due to a band wagon effect, where an increasing number of supporters invest in the stocks of those companies until they gradually become the giants they are today?

When posing the question: "is bitcoin a bubble" it is not the mechanics of price increase which should be questioned imo. It may be natural behavior for people to flock to winning sports teams, winning stocks and things they believe will offer them a boost in life. The bandwagon effect doesn't imply ponzi scheme or overvaluation. The tendency people have to hop on winning trends says nothing about whether bitcoin is a bubble.

And that is the main reason of why bitcoin would not drop until we hear a massive FUD coming from some goverments or just a bank, bitcoin will be bullish because the demand is HUGE.


You are wrong with this, once that all people introduce theirselves into this sytem, they will like to stay in here, they have not discovered the real potential of bitcoin yet, they are still on the phase 1 of the adoption.


It will never be happening, do you really think that the worldwide bank is going to say that bitcoin is a "normal currency", no.

Well I don't blame them at all. I just point out the fact that bitcoin is, in its vast majority, not used for what it has been created. Just stating fact.


Let's not blame it at all, it makes perfect sense to want a nice investment.


I don't see your point.


Please, let's not review every possible definition of a ponzi scheme.

The main characteristic of a Ponzi is to give capital gain to 1st investers with the money of the 2nd investers, give capital gain to the 3rd with the 4th, etc... other stuff, like centralized or not is detail.
I said bitcoin "looked like" a ponzi but it is more than that.
On one side, there is the trading part, giving sometimes huge fluctuations to the value (panic selling, incertitude, external actors...). I think THIS part is the bubble part. Sometimes, price increase drastically and then crashes. Bubble.
On the other side, the price is sky rocketing (and also helps bubble crashes recoveries) because bitcoin exposition controls the number of people coming in (and also the global point of view, even of the bitcoin first enthusiasts : "oh yeah, we talk a lot about bitcoin today, I'll buy some more because I think it will make the price rise").
Finally, on the last and sadly small small side, small fluctuation due to people actually using bitcoin as a currency.

There are of similarities between ponzi and the sky-rocketing part, as I said (simplified): 1st buyers buy ultra low, sell higher to new buyers 2, new buyers 3 buy to 2 and sells higher to new buyer 4... (alongside with pumps and dumps).
This is possible because more and more people are away of the bitcoin.

Only, as long as people doesn't use it as a proper money (or big players like amazon allows the masses to do so easily), when new buyers XXXX will try to sell to the next that never come... the law of supply and demand suggest a dramatic price drop. This is my fear (and this is also my explanation to why some people see similarities with ponzis)

I do not think it's a ponzi, but a bubble, though the difference is very small

How people use their bitcoins is up to them, this is what decentralisation is all about.
I personally spend it to help people know about these digital currencies,which is a way to keep it alive and with so many people having an interest in cryptocurrencies this feature of anonymity holds no water and it now stands to be pseudonymous
Lets blame it on greed

We are are hoping for a big player join the world of bitcoin as this would bring a positive impact in this ecosystem

You are right that bitcoin adoption is it's early stages. But due to the fact that it is so revolutionary and so much better than we currently have, I think adoption is just a question of time. The same happened about 20 years ago with the internet: as adoption increased to every household it created whole bunch of industries (lycos, altavista, yahoo, dotcoms, myspace, google, facebook, apple, android, online movies, online trading, work online, online everything), that all use internet as a base. That's why bitcoin is not just a ponzi scheme, but rather inevitable future.

A Ponzi pays out profits to early investors by using the money of new investors. New investors, are promised the same profits, but the system eventually cannot pay it out when outflow overcomes inflow. A ponzi is managed by a central system that determines who gets paid, that processes profits.

There are no promises in trading Bitcoin, except for the ones that investors imagine for themselves. There are no benefits for recruting newcomers, you don't earn referral fees for new people buying Bitcoin. There is no central scheme in Bitcoin, traders decide between themselves what price the buyer is willing to pay to the seller. For as long as someone is willing to pay the seller's price, a trade happens. There is no exchange of new or old money, there is exchange of existing value.

If Bitcoin looks like a ponzi scheme, then in general, the trading of every stock, commodity and asset can be seen as a ponzi.

If those big companies did able to adopt bitcoin as making it as a new way payment option then expect price would really surge up but this doesn't mean that it would able to reach up the state on where Satoshi was aiming for. It might done some parts but not as a whole and would able to replace fiat on any way.Most economist do really see this thing as a Ponzi one because price have driven by the community itself but well we don't really care at all as long it do makes money and can be used into any other payment terms then it would really be good no matter what.

I see the logic in this, however let's look at tylikely scenario say from now through five ten years.

1. Presently, people are getting to know more and are adopting bitcon. Incidentally, they are in it mostly because they view the coin as an asset not as a means of transfer of value.

2. We are all aware that with time, the demand may taper off, say in five years because majority of those 'investors' are sitting back watching the bloom of their investments.

3. The Bitcoin bull run may slow down, stall or even become a bearish market.

4. If this happens in say five years from now, mining difficulty would have increased. The number of Bitcoin in circulation wouldn't have increased proportionately with the large number of new adopters, so that could mean that the demand for Bitcoin would still be higher than supply mitigating the effect of  usage mainly as a digital asset.

That was never one of the core aims.  Read through the whitepaper.
This is assuming that everything which rises dramatically in price must continue rising until there is literally no money left that could possibly fuel it.

What you're missing is that a significant amount of people will continue to be skeptical or uninterested, and some people will be scared away, considering it more likely to be a bubble if the price rises higher.  If we went by your logic, pretty much everything would be worth loads.
A Ponzi scheme involves a central authority gaining money by accepting investments into a central platform and then distributing money to earlier investors.  A speculative asset and a Ponzi scheme are entirely different, and it would be ridiculous to conflate the two terms.

I think that all the new users is actually a good thing. I myself find it hard to buy and sell bitcoins because when I do sell just before a large drop, the spread in the exchange is usually too large for me to profit when buying back. So I just hold. And I suppose there are also a lot of people who do that.

And aside from "hodlers" there are people who don't exactly take out all their money. Once they got into bitcoin, they start trading. So while their money might seem to be going out, it's still in the cryptoscene and come back in when they buy during plunges.

The question is how long they will be rich. It seems to me that bitcoin price is really overpriced. It means that someday she will fall sharply. Who can with 100% accuracy to predict the behavior of bitcoin? I think that everyone should make for themselves an informed decision. Investing in bitcoin is very high risk but the prize can be very large too.

Bitcoin looks like that because the economic incentives that are programmed into the system encourage bubble creation. When most of the demand for bitcoin is speculative in nature, it cannot function as a currency and it's value grows more and more unstable. I believe these inherent incentives, are very good for the developers and early adopters but pose a real danger to the rest of us. I elaborated on this topic in length in a sepperate post which you are invited to read.

A little nitpicking. BTC was never anonymous. It was this compromise from the ideal that allowed BTC to be created n the first place.

Another nitpick - there isn't a relation to a Ponzi scheme. If anything one can compare it to a pump and dump, but it's way past that stage now.

People aren't spending much now primarily because they think it's going to go up in value. That will change. The price will level off.

The price recovers itself because in my opinion we haven't seen a real hard drop yet. Even the "big crash" that happened in 2013 was due to a platform hack, so it joins the category of "heavy weights fluctuations".

As I said, we are still very early in the curve of acceptance. The more users get in, the easier it is for bitcoin to recovers. My fear is : what happens when the curve of acceptance is done ? What happens when nobody new comes into the market ? The price will be unpredictable.

The huge advantages of bitcoin are about being used as a currency (security, transaction immutability, privacy...), otherwise its value lays on nothing (or maybe the physical electricity that miners invested to secure transactions and generate new bitcoins). That's why, if nobody use it as a proper currency, it IS a Ponzi : you invest, sell at higher price, the one who bought does the same, etc etc... until there is nobody left to buy it, no new users.
I didn't say that it was in reality because, as Mometaskers, there is some actors that consider using it as money, but we need heavy weights AND user support. HODLing will become dumb at some point.


Rich in 2020, I believe so, but you can't predict anything beyond that. It will all depend on big players choices (CEOs and governments).

IMO it's not Ponzi at all , bitcoin is a currency that can be use for investment especially like ponzi scheme, they offer unreasonable profit by investing bitcoin.
Some people afraid but if they are dare to take the risk, you will see that bitcoin will make you rich

The price only really drop when it gets dumped hard (and not much us small players can do about that). There is still use to all this speculation though. More people are talking about it. As they invest in it, they might also try to use it for other transactions. I originally got in for the speculation you mentioned and intended to just hold coins. I ended up using some of those to pay bills and now I even use them to load my mobile.

Companies follow where the money is. Years ago utilities here in my country probably wouldn't accept crypto as payment... well now they do. And this is a fuckin 3rd world country. Only a matter of time before you start seeing larger companies do it.

And once that has already happened, it's less likely interest would suddenly drop down to 0. That's what we are hoping for, for a virtuous cycle to get started.

It's constantly happening and what we see next is that the price recovers itself, so what would this be? Maybe a sustainable Ponzi scheme that is always recreating itself even stronger? Increasements and decreasements in price are part of Bitcoin's nature, and although there is speculation, there is utility for Bitcoin, so it doesn't seem a Ponzi.

Now that BTC price is hiting awesome numbers I have seen experts trying to blame it, they say Bitcoin is pure speculation and for this reason it can't be considered an investment.

This is precisely my point. Bitcoin's future is completely uncertain without that. I kinda disagree with the HODL reflex (unless you consider bitcoin purely as an investment and you don't keep it too long because at some point people just might lose interest into bitcoin). The best way to make amazon (or so) accept bitcoin is simply to use it as a currency now. Just start using it as a currency, let's make a bitcoin amazon-like store, and then heavy weights will start consider it as a proper money.

Yes we need this to happen, we really need big players like amazon, Facebook, Mac Donald’s, and many more to accept the bitcoin as mode of payment. This will then actually give it the status of “currency”. Now a days it’s been used like normal asset which we see in the stock echangesvand money making financial institutes.

If this continued then it may not be used as currency ever again because people will think that it’s just an asset, and to be honest people don’t bother thinking it that way. If they are getting money out of it then they are more than happy to have it like that way.

So somewhere someday this has to be changed. Bitcoin as whole is currency or at least Mr Satoshi thought so in first place and put his efforts into it. Anyway let’s see what the future will bring to it.

First thing to admit in the bitcoin world nowaday is that bitcoin isn't what it was created to be.
Bitcoin was originally created to be an anonymous currency, with immutable transactions, freeing people from the dictatorship of the banks.
Amongst bitcoin enthusiasts, you can find original bitcoin users, aiming to spend it and use it like a genuine currency. But the majority use bitcoin as a pure speculative product.

The more we hear about bitcoin rising price, the more people want their piece of the cake "ok I want to invest it that too, I want to make a money and it looks like a nice increasing value", adding to the demand. I don't think the price of bitcoin will decrease anytime soon because we are still at the beginning of the curve of adoption, as we can see on, for example, google trend :



My guess is : at each peak, bitcoin earns new users, making the price rise. When they have used all their "potential of speculation", price decrease. We can see on the chart that we have had a huge peak of attention, and coinbase and other trading platforms confirms it, bitcoin has a lot of new users.

It looks like a Ponzi scheme because, when every potential bitcoin users of the population will have exhausted all of their "potential of speculation", there will be nothing left to sustain the price of the bitcoin.

Our "only" chance is that, in the ~2 comings years, huge actors like amazon, facebook, even governments, doesn't obstruct to bitcoin (like china did) but instead start to give bitcoin credits as a proper currency and not as a stock product (like it is happening now).

TL;DR : I really do hope that amazon will one day start to accept bitcoin