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It's not a Ponzi scheme because in ponzi scheme you deliberately use late investors money to pay early investors. What happens in cryptocurrency is fake-exchan
by bronzeage 5y ago
It's not a Ponzi scheme because in ponzi scheme you deliberately use late investors money to pay early investors.
What happens in cryptocurrency is fake-exchange scheme. Tether is a fake currency printed in unlimited way by bitfinex which is also an exchange. By pretending tethers are real dollars you create the appearance of a stronger market for cryptocurrency than actually exists. It all rests on increasing the number of tether in circulation. It will fail when there is a run-on-the-bank on tether.
- ramijames 5y agoExcept that during crashes like this one, what you see is everyone moving their crypto holdings to stablecoins. The intent is to wait things out and then buy back in and profit during the next cycle.
- celticninja 5y agoThey move to stable coins because most of those exchanges do not have dollar trading, rather you have to have a stablecoin as a middleman between fiat and crypto.
- krrrh 5y agoThe move to stablecoins instead of cash is a reflection of major exchanges not being able to maintain banking relationships.
- coolspot 5y agoAlso tax avoidance. My friend exchanged all his ETH to DAI at the top, doesn’t have to report that to IRS.
- AlexandrB 5y agoAs someone else on here pointed out, the IRS would consider this selling ETH and buying an equivalent value in DAI. Selling the ETH is taxable as capital gains. Whether the IRS catches your friend or not is a different matter.
- coolspot 5y agoPoint is, if you sell ETH for USD on Coinbase, they will report you to IRS. But if you convert ETH to DAI, no one will get a report for that.
- notyourday 5y agoSo trading pink seashells for grey seashells?
- Grustaf 5y agoSea shells have intrinsic value, cryptos don't.
- gruez 5y agoWhat's the difference between: * seashell (intrinsic value: $0.01, market value: $100.00) * seashell token (intrinsic value: $0.00, market value: $99.99)
- notyourday 5y agoWhen no one wants to pay you anything for your seashells, you are stuck with the seashells.
- Grustaf 5y agoI take seashells every time. You can’t decorate your hut with ethereum.
- delecti 5y ago"Everyone" can't move from crypto. One person has to buy for another to sell.
- sashimi-houdini 5y agoThe term you're looking for is "naturally occurring Ponzi scheme" https://openknowledge.worldbank.org/handle/10986/19358 https://openknowledge.worldbank.org/handle/10986/19358
- chii 5y agoVery interesting paper.