I would normally agree if not for the Hodling Parrots, their arrival heralds the spring of bubble.
On a more serious note If bitcoin ultimately lead to perpetual depression in the economy would that count as a collapse?
Making bitcoin bubble by proxy?
Can bitcoin deliver what future economy will need (whatever that may be)? A lot depend on that answer I think.
Topic: Why bitcoin is very different from Ponzi/Pyramid/Bubble - page 4. (Read 3691 times)
How about "because it isn't"? It doesn't fit the definition.
From wiki:
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A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from existing capital or new capital paid by new investors, rather than from profit earned by the individual or organization running the operation.
Since the scheme requires a continual stream of investments to fund higher returns, once investment slows down, the scheme collapses as the promoter starts having problems paying the promised returns (the higher the returns, the greater the risk of the Ponzi scheme collapsing)
A pyramid scheme is a form of fraud similar in some ways to a Ponzi scheme, relying as it does on a mistaken belief in a nonexistent financial reality, including the hope of an extremely high rate of return. In a pyramid scheme, those who recruit additional participants benefit directly. It explicitly claim that new money will be the source of payout for the initial investments, and it requires exponential increases in participants to sustain it
An economic bubble: A bubble is similar to a Ponzi scheme in that one participant gets paid by contributions from a subsequent participant (until inevitable collapse). A bubble involves ever-rising prices in an open market (for example stock, housing, or tulip bulbs) where prices rise because buyers bid more because prices are rising. Bubbles are often said to be based on the "greater fool" theory. As with the Ponzi scheme, the price exceeds the intrinsic value of the item, but unlike the Ponzi scheme, there is no single person misrepresenting the intrinsic value
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So, the common reason for all these schemes to collapse is that the system run out of increased participants (and money inflow). Same thing will happen to bitcoin (of course not now)when the market reach certain level of saturation, its value can not appreciate exponentially forever. What makes bitcoin to hold its value by then?
I can think of several reasons:
First is its utility as a payment medium. If every merchant accept payment with bitcoin, then people don't have the need to sell bitcoins on the exchanges, that will reduce the sell pressure on the exchanges. Especially, if merchants around the world use a fixed bitcoin price for their goods during a year, when bitcoin exchange rate crashed, people will rush to buy cheap coins to purchase those goods, thus push the exchange rate back
Second is its utility as a store of value. With ever increasing productivity, many people will accumulate more and more savings and those savings must find a secure form of storage that is inflation resistant. Bitcoin is the right candidate to virtualize the assets
Third is the backing of miners. Miners are the distributed central bankers in bitcoin ecosystem. Just like central banks, they will accumulate large amount of bitcoin and foreign currency reserve to stabilize the exchange rate. They sell coins when it rise too fast, and buy back coins when the price crashed, this will ensure the price stability of bitcoin. People always say that there is nothing backing bitcoin, but many early adopters have accumulated huge amount of fiat currency during each price rally and can absorb a great deal of the sell pressure released from the market with their fiat currency reserve
Any other ideas?
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A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from existing capital or new capital paid by new investors, rather than from profit earned by the individual or organization running the operation.
Since the scheme requires a continual stream of investments to fund higher returns, once investment slows down, the scheme collapses as the promoter starts having problems paying the promised returns (the higher the returns, the greater the risk of the Ponzi scheme collapsing)
A pyramid scheme is a form of fraud similar in some ways to a Ponzi scheme, relying as it does on a mistaken belief in a nonexistent financial reality, including the hope of an extremely high rate of return. In a pyramid scheme, those who recruit additional participants benefit directly. It explicitly claim that new money will be the source of payout for the initial investments, and it requires exponential increases in participants to sustain it
An economic bubble: A bubble is similar to a Ponzi scheme in that one participant gets paid by contributions from a subsequent participant (until inevitable collapse). A bubble involves ever-rising prices in an open market (for example stock, housing, or tulip bulbs) where prices rise because buyers bid more because prices are rising. Bubbles are often said to be based on the "greater fool" theory. As with the Ponzi scheme, the price exceeds the intrinsic value of the item, but unlike the Ponzi scheme, there is no single person misrepresenting the intrinsic value
--------------------------------------------------------------------------------
So, the common reason for all these schemes to collapse is that the system run out of increased participants (and money inflow). Same thing will happen to bitcoin (of course not now)when the market reach certain level of saturation, its value can not appreciate exponentially forever. What makes bitcoin to hold its value by then?
I can think of several reasons:
First is its utility as a payment medium. If every merchant accept payment with bitcoin, then people don't have the need to sell bitcoins on the exchanges, that will reduce the sell pressure on the exchanges. Especially, if merchants around the world use a fixed bitcoin price for their goods during a year, when bitcoin exchange rate crashed, people will rush to buy cheap coins to purchase those goods, thus push the exchange rate back
Second is its utility as a store of value. With ever increasing productivity, many people will accumulate more and more savings and those savings must find a secure form of storage that is inflation resistant. Bitcoin is the right candidate to virtualize the assets
Third is the backing of miners. Miners are the distributed central bankers in bitcoin ecosystem. Just like central banks, they will accumulate large amount of bitcoin and foreign currency reserve to stabilize the exchange rate. They sell coins when it rise too fast, and buy back coins when the price crashed, this will ensure the price stability of bitcoin. People always say that there is nothing backing bitcoin, but many early adopters have accumulated huge amount of fiat currency during each price rally and can absorb a great deal of the sell pressure released from the market with their fiat currency reserve
Any other ideas?
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