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Does anyone know where the money that initially went into the cryptocoins during the run-up this year came from, or where it went?

rb808 9y ago
It works like a Ponzi scheme. The people who are buying now give their money to the people who got in earlier. As long as more and more people buy its great but eventually you run out of buyers - optimistically the price will level off but more realistically it'll crash.
- SippinLean 9y ago
  >The people who are buying now give their money to the people who got in earlier. This is entirely incorrect, no users are paid dividends.
  - rb808 9y ago
    No Dividends, the early people sell their currency to the new buyers.
- billmalarky 9y ago
  This isn't correct and is downright misleading. There are many possible scenarios. IE people will hold the Ether under the assumption that it will be more valuable in the future. If the supply of "sellers" goes down and the number of "buyers" stays constant, the price will continue to go up (ignoring new ETH being created for simplicity). As to how ETH could become valuable? Well if the network really does scale and the possibility for decentralized apps really does come to pass, then this is an incredibly transformative technology with a lot of potential, that runs on ETH. Ponzi schemes are scams because there is no value created, and it is known to the scammers that there is no value being created. With crypto currencies the value is big "unknown" which is why it's speculative, but it certainly isn't a "scam" sense there is true potential there.
  - rb808 9y ago
    So the price will rise and rise because people think it will rise and rise, and thus not sell? Sounds great.
  - paulgb 9y ago
    It seems likely that more advanced currencies will continue to be developed. Why would ETH continue to hold value when a more advanced currency comes around, just as ETH has eaten into BTC mcap? It may not be an intentional Ponzi scheme, but it seems like a bubble economy.
    - Zarath 9y ago
      Sure, once there are fewer low hanging fruit improvements to be made on existing currencies, something will eventually reach sufficient network effect that it will be very very difficult to usurp
    - billmalarky 9y ago
      Same argument can be made for stocks in companies. Sure it could be a bubble. No one knows the value of this stuff it's still 100% speculative (not generating a known return). That's why there's so much potential for massive returns at this stage. That said, don't put money that you can't afford to lose into cryptocurrencies or there's a good chance you could get hurt. Also, it's a great way to get easy exposure to high risk investments as a part of your risk adjusted portfolio.
      - paulgb 9y ago
        Stocks and crypto are both subject to speculation, but it's apples and oranges. The actual value of a stock is its discounted future value. When people speculate on stocks, they speculate on what its discounted future value is. With crypto, the discounted future value is by that definition zero. People are instead speculating on what the consensus value will be, i.e. what they will be able to sell it for. It seems that in time the consensus will favor the currency with the best technology, not the one that was first. (My personal bet is that all crypo will trend towards zero eventually, but that's besides my point here)

rb808 9y ago

It works like a Ponzi scheme. The people who are buying now give their money to the people who got in earlier. As long as more and more people buy its great but eventually you run out of buyers - optimistically the price will level off but more realistically it'll crash.

SippinLean 9y ago
>The people who are buying now give their money to the people who got in earlier. This is entirely incorrect, no users are paid dividends.
- rb808 9y ago
  No Dividends, the early people sell their currency to the new buyers.
billmalarky 9y ago
This isn't correct and is downright misleading. There are many possible scenarios. IE people will hold the Ether under the assumption that it will be more valuable in the future. If the supply of "sellers" goes down and the number of "buyers" stays constant, the price will continue to go up (ignoring new ETH being created for simplicity). As to how ETH could become valuable? Well if the network really does scale and the possibility for decentralized apps really does come to pass, then this is an incredibly transformative technology with a lot of potential, that runs on ETH. Ponzi schemes are scams because there is no value created, and it is known to the scammers that there is no value being created. With crypto currencies the value is big "unknown" which is why it's speculative, but it certainly isn't a "scam" sense there is true potential there.
- rb808 9y ago
  So the price will rise and rise because people think it will rise and rise, and thus not sell? Sounds great.
- paulgb 9y ago
  It seems likely that more advanced currencies will continue to be developed. Why would ETH continue to hold value when a more advanced currency comes around, just as ETH has eaten into BTC mcap? It may not be an intentional Ponzi scheme, but it seems like a bubble economy.
  - Zarath 9y ago
    Sure, once there are fewer low hanging fruit improvements to be made on existing currencies, something will eventually reach sufficient network effect that it will be very very difficult to usurp
  - billmalarky 9y ago
    Same argument can be made for stocks in companies. Sure it could be a bubble. No one knows the value of this stuff it's still 100% speculative (not generating a known return). That's why there's so much potential for massive returns at this stage. That said, don't put money that you can't afford to lose into cryptocurrencies or there's a good chance you could get hurt. Also, it's a great way to get easy exposure to high risk investments as a part of your risk adjusted portfolio.
    - paulgb 9y ago
      Stocks and crypto are both subject to speculation, but it's apples and oranges. The actual value of a stock is its discounted future value. When people speculate on stocks, they speculate on what its discounted future value is. With crypto, the discounted future value is by that definition zero. People are instead speculating on what the consensus value will be, i.e. what they will be able to sell it for. It seems that in time the consensus will favor the currency with the best technology, not the one that was first. (My personal bet is that all crypo will trend towards zero eventually, but that's besides my point here)