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The explanation is simply that there are people that have bought in that want others to buy in also so they can liquidate for a profit. Meanwhile, others are su

The explanation is simply that there are people that have bought in that want others to buy in also so they can liquidate for a profit. Meanwhile, others are susceptible to what amounts to FOMO-driven investment. The same sentiment that drove the beanie-baby craze, the dot-com boom, the subprime mortgage crisis, the current metaverse craze, and so on. Nothing new under the sun.

ChuckNorris89 5y ago
>there are people that have bought in that want others to buy in also so they can liquidate for a profit. Is that any different than a ponzi/pyramid scheme?
- TomSwirly 5y ago
  Consider this. Crypo cannot create or destroy fiat currency. So if you sell your crypto and make a profit in dollars, it's exactly because someone else bought it at a higher price than you did. And they expect someone else will buy it from them, in just the same way... So every dollar that comes out of cryptocurrency is because a later investor put a dollar in. Doesn't that sound like the definition of a Ponzi scheme?
  - ChuckNorris89 5y ago
    That means the ones at the bottom, whenever that bottom is gonna be reached, will be left holding the bags for those who got in and got out early.
  - scoopertrooper 5y ago
    Actually it can create fiat currency... in a roundabout way... The core of the coin ecosystem are the stable coins, which are generally pegged to fiat, but are only backed by fractional reserves of cash. So the same USD can be recycled many times to buy Bitcoin. Not only that, but the stable coin operators are under no obligation to exchange their coins back to you for the pegged currency at face value. Tether is essentially an unregulated bank with nominal deposits totaling 73 billion USD, no obligation to pay depositors, a huge amount of minimally disclosed liabilities, and unaudited financial reserves. Ponzi was but an amateur.
    - oarabbus_ 5y ago
      >Not only that, but the stable coin operators are under no obligation to exchange their coins back to you for the pegged currency at face value. >but are only backed by fractional reserves of cash. Maybe tether, but that isn't true of all, or even most stablecoins. Some stablecoins are overcollateralized rather than fractionally lent. As for the obligation, USDC for example is a fully audited system (by firm Grant Horton, who performs weekly audits), backed 1:1 by cash/cash equivalents and redeemable for $1 USD.
      - scoopertrooper 5y ago
        USDC only has half the market cap of Tether. In fact, Tether has a higher market cap than all the other stable coins combined! So everything I've said is still true even if some operators are not as shady as the market leader. https://coinmarketcap.com/view/stablecoin/ https://coinmarketcap.com/view/stablecoin/ However, even USDC is still doing fractional reserve banking because an unspecified amount of its reserves are tied up in securities that have maturities up to 90 days, so they are still susceptible to a bank run. Though, granted they seem to be running a much more respectable operation than Tether. The third biggest stable coin BUSD, looks pretty shady as well. They release monthly audited accounts (good), but they're terse as hell. What liabilities do they have? Have these reserves been used as collateral in loans? Which banks are they in? What steps have the firm taken to audit these funds? No way to know, we're just get a terse list of aggregate numbers. https://paxos.com/attestations https://paxos.com/attestations
  - GaylordTuring 5y ago
    This exact reasoning can be applied to the buying and selling of gold, can it not? I’m not saying that therefore it’s moot, but is there a difference? Would you call gold a ponzu scheme as well or do you see a difference between the two? It can also be applied to, for example, the buying and selling of old watches or art.
    - kthejoker2 5y ago
      The key difference between just pure bubble assets (where extrinsic demand outstrips intrinsic demand) and Ponzi schemes are the representation of the real thing being bought underneath. In the gold market, you are buying a contract to deliver you physical gold at a point in time. Similarly with tulips, Beanie babies, fine art, and old watches the underlying asset is what it is. MLMs and other traditional pyramid schemes also do typically hand you real assets, and so are not inherently Ponzi schemes. But when that extrinsic demand is driven by fraudulent claims (like Madoff's "beat the market every year" returns), then it can be considered a Ponzi scheme, because they don't even get the tulips or Picassos or whatever, they get nothing. The gray area, especially with MLMs, is what kind of support and service benefits you get - these are often fraudulent or misleading (Ponzi scheme) but they don't inherently have to be.
- DonHopkins 5y ago
  Most ponzi/pyramid schemes don't burn as much coal and cause as much cancer and lung disease.
3r8Oltr0ziouVDM 5y ago
You don't need to invest if you just want to use it.
- DonHopkins 5y ago
  But you still need to burn coal and cause cancer and lung disease to use it.

ChuckNorris89 5y ago

>there are people that have bought in that want others to buy in also so they can liquidate for a profit. Is that any different than a ponzi/pyramid scheme?

TomSwirly 5y ago
Consider this. Crypo cannot create or destroy fiat currency. So if you sell your crypto and make a profit in dollars, it's exactly because someone else bought it at a higher price than you did. And they expect someone else will buy it from them, in just the same way... So every dollar that comes out of cryptocurrency is because a later investor put a dollar in. Doesn't that sound like the definition of a Ponzi scheme?
- ChuckNorris89 5y ago
  That means the ones at the bottom, whenever that bottom is gonna be reached, will be left holding the bags for those who got in and got out early.
- scoopertrooper 5y ago
  Actually it can create fiat currency... in a roundabout way... The core of the coin ecosystem are the stable coins, which are generally pegged to fiat, but are only backed by fractional reserves of cash. So the same USD can be recycled many times to buy Bitcoin. Not only that, but the stable coin operators are under no obligation to exchange their coins back to you for the pegged currency at face value. Tether is essentially an unregulated bank with nominal deposits totaling 73 billion USD, no obligation to pay depositors, a huge amount of minimally disclosed liabilities, and unaudited financial reserves. Ponzi was but an amateur.
  - oarabbus_ 5y ago
    >Not only that, but the stable coin operators are under no obligation to exchange their coins back to you for the pegged currency at face value. >but are only backed by fractional reserves of cash. Maybe tether, but that isn't true of all, or even most stablecoins. Some stablecoins are overcollateralized rather than fractionally lent. As for the obligation, USDC for example is a fully audited system (by firm Grant Horton, who performs weekly audits), backed 1:1 by cash/cash equivalents and redeemable for $1 USD.
    - scoopertrooper 5y ago
      USDC only has half the market cap of Tether. In fact, Tether has a higher market cap than all the other stable coins combined! So everything I've said is still true even if some operators are not as shady as the market leader. https://coinmarketcap.com/view/stablecoin/ https://coinmarketcap.com/view/stablecoin/ However, even USDC is still doing fractional reserve banking because an unspecified amount of its reserves are tied up in securities that have maturities up to 90 days, so they are still susceptible to a bank run. Though, granted they seem to be running a much more respectable operation than Tether. The third biggest stable coin BUSD, looks pretty shady as well. They release monthly audited accounts (good), but they're terse as hell. What liabilities do they have? Have these reserves been used as collateral in loans? Which banks are they in? What steps have the firm taken to audit these funds? No way to know, we're just get a terse list of aggregate numbers. https://paxos.com/attestations https://paxos.com/attestations
- GaylordTuring 5y ago
  This exact reasoning can be applied to the buying and selling of gold, can it not? I’m not saying that therefore it’s moot, but is there a difference? Would you call gold a ponzu scheme as well or do you see a difference between the two? It can also be applied to, for example, the buying and selling of old watches or art.
  - kthejoker2 5y ago
    The key difference between just pure bubble assets (where extrinsic demand outstrips intrinsic demand) and Ponzi schemes are the representation of the real thing being bought underneath. In the gold market, you are buying a contract to deliver you physical gold at a point in time. Similarly with tulips, Beanie babies, fine art, and old watches the underlying asset is what it is. MLMs and other traditional pyramid schemes also do typically hand you real assets, and so are not inherently Ponzi schemes. But when that extrinsic demand is driven by fraudulent claims (like Madoff's "beat the market every year" returns), then it can be considered a Ponzi scheme, because they don't even get the tulips or Picassos or whatever, they get nothing. The gray area, especially with MLMs, is what kind of support and service benefits you get - these are often fraudulent or misleading (Ponzi scheme) but they don't inherently have to be.
DonHopkins 5y ago
Most ponzi/pyramid schemes don't burn as much coal and cause as much cancer and lung disease.

3r8Oltr0ziouVDM 5y ago

You don't need to invest if you just want to use it.

DonHopkins 5y ago
But you still need to burn coal and cause cancer and lung disease to use it.