Remember when the coli first discovered crypto currency and brehs were about to cop lambos and shyt?
- Thread starter Carlton Banks
- Start date
Bitcoin to $10k right?
nah it’s honestly not…and you using omicron crippling multiple markets to get off your fake “I told you so” lends more reason to why it was so easy to get you banned from the thread…you literally served no purpose but to come in that thread solely when bitcoin took a hit…you are your own echo chamber…alright now, let me not waste anymore of my time
Lol that doesn't even make sense, an individual can't be their own echo chamber. Just because I occasionally offered different POV isn't a reason to get banned. You all just don't want a negative opinion because crypto is reliant on gaining new investors to pump it higher, just like a ponzi scheme. But it's all gonna come crashing down very soon.
Yup it will eventually fall below $10K. I stand by that.
Bitcoin is a Ponzi
What is a Ponzi?
A Ponzi scheme, or "ponzi" for short, is a type of investment fraud with these five features:
Features 3, 4, and 5 imply that investing in bitcoin, like "investing" in lottery tickets, is a very negative-sum game. Namely, at any time, the total amount that all investors have taken out is considerably less than what they have put into the scheme; the difference being the amount that the operators have taken out. Thus the investors, as a whole, are always in the red, and their collective loss only increases with time.
The expected profit from investing in such a scheme is negative. While some investors who cash out may make a profit, that comes at the expense of other investors, who will lose more than their "fair" share of the general loss above.
Features 1 and 2 make the scheme a fraud, rather than simply a bad investment (or bad "musical chairs" gambling game). As a minimum, the operators should warn investors of the negative-sum character and negative expected profit. In the case of bitcoin (and all other cryptos), not only that does not happen, but there are thousands of promoters and "investment experts" who predict impressive price increases and/or claim that bitcoin will have massive uses in the future that would somehow make it valuable. Apart from the mendacity of those claims, those promoters never point out that such massive uses would not translate into revenue for the investors.
The observation that investing in cryptocurrencies is a ponzi scheme is not new or a cheap shot. Among many others, it was expressed in 2014 by economists Nouriel Roubini of NYU and Kaushik Basu of the World Bank (WB) and echoed by investment analyst David Webb in 2017 and by WB's president Jim Yomh Kim in 2018.
What is a Ponzi?
A Ponzi scheme, or "ponzi" for short, is a type of investment fraud with these five features:
- People invest into it because they expect good profits, and
- that expectation is sustained by such profits being paid to those who choose to cash out. However,
- there is no external source of revenue for those payoffs. Instead,
- the payoffs come entirely from new investment money, while
- the operators take away a large portion of this money.
Features 3, 4, and 5 imply that investing in bitcoin, like "investing" in lottery tickets, is a very negative-sum game. Namely, at any time, the total amount that all investors have taken out is considerably less than what they have put into the scheme; the difference being the amount that the operators have taken out. Thus the investors, as a whole, are always in the red, and their collective loss only increases with time.
The expected profit from investing in such a scheme is negative. While some investors who cash out may make a profit, that comes at the expense of other investors, who will lose more than their "fair" share of the general loss above.
Features 1 and 2 make the scheme a fraud, rather than simply a bad investment (or bad "musical chairs" gambling game). As a minimum, the operators should warn investors of the negative-sum character and negative expected profit. In the case of bitcoin (and all other cryptos), not only that does not happen, but there are thousands of promoters and "investment experts" who predict impressive price increases and/or claim that bitcoin will have massive uses in the future that would somehow make it valuable. Apart from the mendacity of those claims, those promoters never point out that such massive uses would not translate into revenue for the investors.
The observation that investing in cryptocurrencies is a ponzi scheme is not new or a cheap shot. Among many others, it was expressed in 2014 by economists Nouriel Roubini of NYU and Kaushik Basu of the World Bank (WB) and echoed by investment analyst David Webb in 2017 and by WB's president Jim Yomh Kim in 2018.
Common Objections
- That is not the legal definition of ponzi in country X. The legal definition is relevant to understanding the legal implications: can anyone in Crypto Space be prosecuted for running/promoting/aiding that scheme in country X?
But if one wants to know whether bitcoin is a good investment, or just an old type of investment fraud with a new coat of paint, the legal definition is irrelevant. One must use a quacks-like-a-duck definition, that describes the mechanism through which fools and money are separated and the reasons why it is a fraud.
- That is not the definition of ponzi from source X. Indeed there are many variants of the definition, and they may include other spurious requirements (see below). But those requirements were incidental features of almost all ponzis before bitcoin, not essential features. They are not the reason why investing in a ponzi is a very bad idea, nor the reason why ponzis are frauds rather than just bad investments.
A definition of "TV" a few decades ago could be "a device that converts electrical signals into an image on a cathode ray tube (CRT) screen." But when flat screen TVs appeared, it would have been silly to say "those are not TVs,because they have no CRT." Instead, people would have seen that the mention of CRT in that definition was spurious, and that a useful definition should capture the effect of the device, regardless of the technology.
- It is not a ponzi because it does not guarantee a profit. A ponzi does not need to do that. Madoff's ponzi did not. A ponzi only needs to create the expectation of profit in enough people, which it usually does by actually paying such profits to the few who choose to cash out. Its investors will then be its main promoters.
Ponzis that guarantee a profit will catch only the most ignorant victims, because most people know that such guarantees are impossible in the world of finance; and they will be short-lived, because the cops will come knocking as soon as they see that promise.
- A ponzi scheme must be a company.That is not necessary; there have been many ponzi schemes [NYT1] [UGA1] in which the victims "invested" by simply giving money to the operator(s). And also many schemes in which the company was non-existent, such as the Bitcoin Savings and Trust that Tendon Shavers ("@pirateat40") pretended to have created.
- It must have a single operator. Like other spurious requirements, this has been generally true of previous ponzis, but it is not relevant for the mechanism, and is not what makes a ponzi a bad investment.
- The operator must lie to investors about the source of profits. Again, while this feature has been present in most previous ponzi schemes, it is neither a necessary nor sufficient requirement for a scheme to have the effect of a ponzi (although, depending on the jurisdiction, it may be necessary for the operators to be prosecuted).
Unlike those classical examples, items 3--5 of the definition and the negative-sum character of crypto investment are obvious to anyone who cares to analyze its money flow. However, the victims of the scheme are unaware of those features because they are obfuscated by a highly complex mechanism and economic arguments that they are not able to understand. While, on the other hand, crypto promoters from Andreessen to Zhao actively spread many lies and misleading claims about the scheme, through malice or ignorance. Investment "experts" like Tom Lee, Mike Novogratz [BPR1]. and Dan Morehead [FOR1] often give extremely optimistic predictions for the price on business or mainstream media. Those predictions have no rational basis whatsoever, and, while qualified with "perhapses" an "maybes" and "not investment advice" disclaimers, they are obviously intended to promote investment in the coins.
Crypto promoters also make dozens of claims about the virtues of the currency and/or the payment system, such as that it will "one day" replace credit cards, replace national currencies, protect people's savings from inflation or confiscation by government, make banks obsolete, starve governments to death by depriving them of taxes or "money printing", enable support of dissidents in oppressive regimes, "bank the unbanked", allow free internet trade of drugs and other illegal items, end corruption, poverty, and inequality, etc. etc. etc. Ripple Inc., for instance, has boasted for many years that their XRP currency will be used by banks for international transfers. Ethereum promoters claimed that its "smart contracts" will remove the need for lawyers and courts in business deals. Creators of several cryptocurrencies, such as IOTA and Tron (TRX), falsely claimed to have partnerships with entities such as Microsoft [PYM1] and the Liverpool Football Club [TRW]. Bitcoin (BTC) promoters falsely claim that the Lightning Network will "soon" turn their crippled payment system into a "Visa killer". And so on. When one tries to debunk any of these claims, the promoters simply switch to another one.
Even if these rosy claims were to materialize, none of them would result in a source of revenue for people holding bitcoins. The value of those payment services would go partly to the users who use coins for payments, and partly to the miners in the form of transaction fees. But most crypto investors do not understand this point. They, almost "by definition", do not understand what a good investment is -- e. g. why gold, stocks, and real estate have value, and why investing in a game that is guaranteed to be negative-sum is a bad idea. And bitcoin promoters make no attempt to educate them on those points -- quite the opposite.
- By that definition, stocks too are ponzis. No. Stocks have an external source of revenue, namely the profit that the company makes by selling its products and services to customers (not investors); and these profits eventually return to the investors through dividends or cash buybacks. In time, those profits are expected to exceed the amount invested, with a significant profit for all investors -- that is, they are expected to be positive-sum games. The market value of stocks reflects these expectations among investors. While some companies fail to achieve this goal, enough of them succeed to make stocks the favorite option of savvy investors.
Companies often fail to distribute profits to investors for several years -- while they are starting up, or because of mistakes or unexpected external events. The market value of their stock will then depend on the expectations by investors of the company's ability to become profitable again, and of its subsequent profits.
A company may also choose, with the approval of its stockholders, to reinvest its profit into growth. This is good for the investors because each becomes the owner of the same fraction of a bigger pie -- including hopefully bigger profits in the following years. And this growth generally makes the stock more valuable.
- By that definition, real estate too is a ponzi. No. Like stocks, real estate creates value while it is being owned, namely the sheltering service it provides to those who live in it. That value returns to the investor (owner) either by him living in the property, or by renting it to others.
- By that definition, gold too is a ponzi. No, gold clearly fails to satisfy that definition on two counts.
First, few if any gold investors have expectations of profits. They generally invest in gold as a hedge -- a "store of value" -- that they hope will retain its value in case other assets go sour.
Second, as a commodity, gold HAS a source of revenue besides the investors; namely, the purchases by consumers like jewelers and industry, who take gold out of the market (2/3 of the production) for uses other than re-sale. When one buys 1 oz of gold, one gets a chip of a metal that one can sell to those consumers, and thus obtain some money that does not come from other investors.
(Nevertheless, investing in gold at the current price seems unwise, since its price is many times its "natural" price as commodity and so it is more likely to go down than up. Thus it is questionable, to say the least whether it is a good "store of value". But this problem is not enough to make it a ponzi.)
MIKE SPLEAN
Superstar
///Vega+++
All Star
What's funny is that bitcoin did crash a few times since it was created but it never went back to its initial rates.
You can bet shortly after it hits...let's say 5000k people will jump on it again and the rate will skyrocket once more
It's like the perfect self-sustaining bubble
It will balloon and shrink but never hit its initial rates...until there are no coins left to mine. Then may be we'll actually figure out what this whole thing was about
satoshi makamoto likely has something up their sleeve with all the bitcoins they reserved for them
I Really Mean It
Veteran
The 12+ year bubble and counting
Can you articulate exactly what makes crypto a 'bubble'?
First you said it was because of stimulus checks and people being bored at home.
The stimulus checks stopped almost a year ago now and people have gotten vaccinated and gone back to work. By your theory shouldn't the market have crashed by now?
12 years? Bernie Madoff's scheme lasted longer than that.
This. I for one wish it would hit 10k again. Best believe I’m copping a few coins.
Awful thread full of awful posts. This one did not age well at all
bruh @Kamala Harris pulled the “nap” dude’s card something hard…dude has literally been saying bitcoin would fail since 2014…I’d “hate” that shyt too if I missed out on it each and every time lmao