https://unherd.com/thepost/is-crypto-just-one-big-ponzi-scheme/
This article ignores other potential benefits to crypto (that is, beyond a possible rise in price) and also ignores precious metals, which like crypto offer no interest payments or dividends but have other benefits. The article also ignores some of the possible RISKS of crypto (e.g., that the alleged security and privacy might be illusions, outright theft by an exchange, loss of a wallet or a password, etc). Metals also have risks (theft of physical metal for instance, including government confiscation, plus the added risk if one uses a third party to hold the metal).
There is nothing in life without risk; assessing risk and choosing which ones to take on are among the more important life skills.
Defining whether or not something is — or has become — a Ponzi scheme has been long forgotten; it involves working out if an investment’s underlying structure creates a negative-sum game. With regulated securities, such as stocks and bonds, investors receive a combination of interest payments, dividends, and cash flows, making these, at the very least, a zero-sum endeavour. With crypto, however, investors receive none of these, only benefiting from a potential rise in price — the so-called greater fool theory.
This disparity, among other things, has led many financial commentators to describe even the number one crypto, Bitcoin, as a negative-sum Ponzi scheme (one FT story suggested it was even ‘worse’ than that). If Bitcoin’s ecosystem collapses, funds can’t be returned to holders because its price going to zero means there’s nothing to recover. But with a Ponzi scheme, funds can be recovered and returned to investors. Following the collapse of the infamous Madoff Ponzi scheme, 14 out of 20 billion dollars initially invested have been recovered from offshore accounts.
For now, Bitcoin’s Ponzi status is irrelevant. Bankman-Fried has simply joined the increasing list of crypto’s nobility who’ve accidentally gloated about profiting from dubious financial structures. Mike Novogratz, CEO of Galaxy Investment Partners, infamously likened Bitcoin to a pyramid scheme, despite how his company’s primary function is cryptocurrency investments. Meanwhile, outlets in the crypto media have also embraced Ponzinomics, like CoinDesk publishing an article with a lede reading: “Yes, it’s a Ponzi scheme. But who cares?”
Wow.
Are you serious?
Large amounts of energy are unquestionably used in contriving a bitcoin, but does it store ANY of that? Not. At. All.
That’s like building a house, burning it to the ground, and parading around with the ashes talking about how valuable they are because of all the energy and effort that went into their creation.
That’s not creation of value, that’s not storage of value. That’s a recipe for destruction, and is a symbol of nothing but mass insanity and money-for-nothing greed run rampant.
Supply and demand just like anything including gold. Distinction should be made between utility vs worth which are totally different. Water has high utility but is cheap because of high supply. Gold jewelry has low utility but is worth a lot because scarcity. Based on supply/demand crypto has value because of that. It has to do with work effort to create a new one which is getting harder and harder based on the algorithm (constraining supply) and increasing demand because fiat is dying.
Demand for a good has (outside of outlier luxury goods like anachronistic Swiss watches whose manufacturers can put thousands of hours into a tourbillon that is outperformed by a $10 watch) absolutely no basis in how much work goes into a product.
The supply and demand intersection will always ultimately converge on the real value (in the case of uncollateralized fiat currencies, unlike air-back cryptocurrencies, value is predicated on the “full faith and credit” if the issuing state, and as soon as states become more and more unable to meet their financial obligations, their fiat currencies approach the intrinsic value of “cryptos”… zero).
You can have bubbles and frenzies that temporarily push prices way above the intrinsic value (tulip bulbs, Japanese real estate, Beanie Babies, “cryptocurrencies”), but this phenomenon always depends on new money, the “greater fools”, rushing in, seeking the widely-touted returns that early entrants got. But when no actual value is being created by an enterprise, it’s a zero sum game (or worse) - “cryptomillionaires and cryptobillionaires” didn’t create a damn bit of value - everything they’ve pulled out was funded directly by later entrants, who just haven’t discovered they’ve lost their shirts yet.
Cryptocurrency shills sound just like Beanie Baby collectors who thought they were going to fund their kids college tuitions with their closets full of “rare, limited supply” Beanie Babies. There’s no lasting value in something with no intrinsic value. “Cryptos” are the most transparently laughable scam ever. Sure, some people made money buying and selling beanie babies, but far more people ended up with rooms full of near-worthless stuffed animals, which, unlike a looted online token, actually still retain some value.
And no, there’s not even a backstop in a demand for unsecured cryptocurrencies as an intermediary currency - they can currently serve as a (highly unstable) exchange currency now, but only because the prices are presently being propped up by greater fools entering the market, greedily chasing illusory windfalls. This will stop, with 100% certainty, and the prices will converge to the true value - zero.