Crypto is entering 2023 bruised and battered.
From a dramatic crash in coin prices to the domino-like collapse of several key players, 2022 tested crypto to the limits.
And, of course, that has brought its critics into the limelight.
Take, for example, Paul Krugman, the Nobel Prize-winning economist.
In the wake of the FTX collapse, he’s calling for crypto regulation. Yet he also suggests regulations would end the crypto industry.
And he continues to be a scathing critic of crypto. He calls it pointless, wasteful, and virtually worthless. And mostly a tool for criminals and Ponzi schemers.
There’s also Jamie Dimon. He’s the CEO of JPMorgan Chase, the global financial services firm with assets over $3 trillion.
He recently called bitcoin a hyped-up fraud and a pet rock.
And in the past, he’s even called it a decentralized Ponzi scheme.
Longtime crypto detractor Peter Schiff is jumping on board, too. The global strategist says the result of the FTX collapse will be no less than crypto extinction.
He thinks you should sell your bitcoin now.
Now, we addressed some of these concerns back in December…
I showed how many of the problems emanated from centralized crypto players.
Meanwhile, blockchains and decentralized applications (dApps) continue to operate as intended.
I also demonstrated the technological innovations since the last Crypto Winter and how those innovations lay the foundation for Web 3.0.
And I provided data on how development, institutional interest, and venture capital investment continue to grow over the long term.
Today, I’ll address one of the common misconceptions about bitcoin head-on… and show you why it’s anything but a scam.
Is Bitcoin a Ponzi Scheme?
One word that keeps coming up is Ponzi.
Ponzi schemes are named after Charles Ponzi, who duped investors in the 1920s with a postage stamp speculation scheme.
Here’s how the U.S. Securities and Exchange Commission defines them:
A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk.
But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves.
With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit new investors, or large numbers of existing investors cash out, these schemes tend to collapse.
Many Ponzi schemes share common characteristics:
The promise of high returns with little or no risk.
Overly consistent returns.
Secretive and complex strategies.
Issues with paperwork.
Difficulty in receiving payments.
Now, let’s look at this through the lens of bitcoin.
In August 2008, pseudonymous developer Satoshi Nakamoto created Bitcoin.org.
Two months later, Satoshi released the bitcoin white paper. Then in January 2009, Satoshi published the initial bitcoin software.
In the bitcoin white paper, Satoshi never promised any investment returns.
Nowhere in the paper is there mention of high investment returns. Nor is there mention of consistent investment returns.
Even today, bitcoin is still characterized as a risk-on, speculative asset with high volatility. That’s not a Ponzi investment.
Another point to consider is the fairness in the launch of the bitcoin network and the bitcoin (BTC) token.
There was no pre-mine. That’s when developers give themselves and their investors coins before the project becomes public.
Satoshi didn’t jumpstart anyone else in the network. Satoshi mined virtually all of their coins at a time when the software was public, and anybody else could mine them.
There was no unique advantage in acquiring coins faster than anyone else. And just like other miners, Satoshi had to spend money for computational power and electricity to mine.
There are nearly 1 million bitcoins believed to belong to Satoshi. To date, Satoshi has never moved them from their initial address. And that says something.
If Satoshi truly were a Ponzi schemer, he would have cashed out.
And that brings up another point. Satoshi has long since moved on from bitcoin – last heard from in 2010.
That means bitcoin has flourished without centralized leadership for over a decade.
Unlike a Ponzi scheme, bitcoin isn’t dependent on “organizers.” Today the bitcoin ecosystem involves a diverse set of stakeholders.
Those include developers, miners, node operators, users, investors, and the diverse economy and set of projects working with the network.
On top of that, most Ponzi schemes rely on secrecy. And the reason is simple: If people understood their investment was a Ponzi scheme, they’d sell right away to get their money back.
So secrecy is key to keeping the Ponzi going.
But that’s the opposite of bitcoin. It’s a distributed piece of open-source software.
It requires a majority consensus to make changes. Every line of code is known. And no central authority can change it.
With bitcoin, anyone can download the software to run a full node. They can audit the entire blockchain and the entire money supply. Bitcoin offers full transparency… whereas a Ponzi scheme would offer none.
It’s also the reason there are no “issues with paperwork” or “difficulty receiving payments.”
When you put it all together, it’s clear bitcoin isn’t a Ponzi scheme.
Bitcoin launched as fairly as possible. The pseudonymous founder or founders never cashed out. No central organizers are running the network. And it’s fully transparent.
We still believe in bitcoin.
It’s a hedge against the vagaries and uncertainties of government actions. It’s a store of value controlled by no one with a predetermined supply.
And it still presents an asymmetrical risk-to-reward opportunity…
So if you’re looking to get started, consider buying a small stake in bitcoin. About $400 is good for the average investor… or even as much as $1,000 for larger investors.
But if you’re looking to take your crypto investments beyond bitcoin, Daily editor Teeka Tiwari has his eye on a subsector of crypto we expect to take off when this bear market turns…
Teeka’s Final Call
As you’ve probably seen, the media is full of headlines calling bitcoin a Ponzi scheme or a scam…
But those so-called experts are overlooking a significant crypto catalyst.
You see, while the broader crypto market is down and many casual investors are selling their positions, institutional investors are racing into crypto…
Fidelity is adding crypto access to its retirement accounts…
Goldman Sachs has stated publicly that it plans to spend tens of millions of dollars buying up bargain crypto firms…
JPMorgan has officially registered a trademark for its own crypto wallet…
And Berkshire Hathaway has taken a $500 million stake in a digital bank offering its own cryptocurrency.
So buying crypto right now could be like buying Amazon for $6 after it fell 93% in the dot-com crash… but you have to know where to look.
That’s why Teeka recently held a special event called “Big T’s Final Call.”
During the event, he explained exactly what’s happening in crypto and shared details on a massive move we’ve never seen before.
You can watch a free replay of the event for a limited time, but don’t wait.
This will likely be the last bear market where we can turn small stakes into meaningful, life-changing returns… and there’s no time to waste.
Analyst, Palm Beach Daily