Coinbase Onramp Now Supports Buying Crypto With Apple Pay

[Analog Kid]

It has been demonstrated as a hedge against inflation. [...] it's well-known to be one.

Those aren't the same thing. I know it's been described as a hedge by people who believe that the max coin count is magical, but I don't know of it being demonstrated as an effective hedge. As I showed, it didn't hold up well during the recent surge.

The U.S. gold strategic reserve is not collateral for the U.S. dollar, because the U.S. dollar is not a debt.

"Federal Reserve notes be issued to a Reserve Bank through the Federal Reserve Agent, or through an Assistant Federal Reserve Agent appointed by the Agent, upon pledge of adequate collateral security by the Bank"

The U.S. dollar is also not backed by Treasuries (that is an absurd notion). Treasuries are debt instruments and future obligations of the U.S. government. The U.S. government would need to come up with dollars to satisfy its obligation of the Treasuries, not the other way around.

Open Market Operations:

When there is an increased demand for base money, the central bank must act if it wishes to maintain the short-term interest rate. It does this by increasing the supply of base money: it goes to the open market to buy a financial asset, such as government bonds. To pay for these assets, new central bank money is generated in the seller's loro account, increasing the total amount of base money in the economy.

 

[flmmkr]

Those aren't the same thing. I know it's been described as a hedge by people who believe that the max coin count is magical, but I don't know of it being demonstrated as an effective hedge. As I showed, it didn't hold up well during the recent surge.

I know they aren’t the same thing and I never said they were.

The time horizon for an asset to be a hedge against inflation is long-term, not short-term. During the same period, gold, which is universally seen as a hedge against inflation, also declined in value. I already said this, but maybe you missed it. Also, gold was down against the dollar from 2012 to 2016. It’s still universally seen as a hedge against inflation even though it spent 4 years losing value against the dollar. Bitcoin loses value against the dollar for a year so it’s not suitable as a hedge against inflation?

You have to look at it with a long-term perspective.

Around 2140 no more BTC will be mined, but they’ll still be mining gold.

"Federal Reserve notes be issued to a Reserve Bank through the Federal Reserve Agent, or through an Assistant Federal Reserve Agent appointed by the Agent, upon pledge of adequate collateral security by the Bank"

You are the one who posted the definition of collateral. Collateral involves debt. That doesn’t make gold a backing of the dollar. There is not enough gold in the strategic reserve to back the U.S. dollar. You would need to back the currency in circulation, currency in bank accounts, and the Treasuries that dollars would be owed on. That’s M2, which is over $21 trillion. The gold is only about 3% of that. You can’t back the dollar with only 3%.

Open Market Operations:

When there is an increased demand for base money, the central bank must act if it wishes to maintain the short-term interest rate. It does this by increasing the supply of base money: it goes to the open market to buy a financial asset, such as government bonds. To pay for these assets, new central bank money is generated in the seller's loro account, increasing the total amount of base money in the economy.

You clearly don’t understand what’s happening there. It’s all about liquidity. When the Federal Reserve wants to decrease liquidity in the markets it sells bonds on the open market to pull dollars out. When it wants to increase liquidity it buys bonds on the open market to inject cash into the markets. That’s the simple explanation of what’s happening and why. It has nothing to do with using Treasuries as collateral for the dollar.

You don’t use a debt instrument that you owe money on as collateral for the money you would use to pay down that debt. That’s like saying you’re going to use a personal loan you owe money on as collateral to get cash to pay off the personal loan.

 

[Analog Kid]

You don’t use a debt instrument that you owe money on as collateral for the money you would use to pay down that debt.

Again, in the words of the Federal Reserve:

"The Federal Reserve Act requires that Federal Reserve notes be issued [...] upon pledge of adequate collateral security by the Bank. [...T]he Federal Reserve Agents designated a [...] Assistant Federal Reserve Agent to control the issuance of notes and to monitor the adequacy of collateral that is pledged by each Bank under a continuing agreement. The agreement, [...], results in the pledge of specified assets that the Bank may own at any time plus whatever amount may be required out of the Bank's other eligible assets, including its participation in Treasury, Federal agency, and GSE debt securities held in the System Open Market Account."


I'm kind of out of patience to teach you how monetary policy is implemented and how money is created all the time being told I don't understand anything about this or that and presumably that the Fed doesn't understand it either. This is a well documented process, and I'm sure you can find many resources on it.

 

[flmmkr]

Again, in the words of the Federal Reserve:

"The Federal Reserve Act requires that Federal Reserve notes be issued [...] upon pledge of adequate collateral security by the Bank. [...T]he Federal Reserve Agents designated a [...] Assistant Federal Reserve Agent to control the issuance of notes and to monitor the adequacy of collateral that is pledged by each Bank under a continuing agreement. The agreement, [...], results in the pledge of specified assets that the Bank may own at any time plus whatever amount may be required out of the Bank's other eligible assets, including its participation in Treasury, Federal agency, and GSE debt securities held in the System Open Market Account."


I'm kind of out of patience to teach you how monetary policy is implemented and how money is created all the time being told I don't understand anything about this or that and presumably that the Fed doesn't understand it either. This is a well documented process, and I'm sure you can find many resources on it.

Dude there is NOTHING in there that says the gold backs the U.S. dollar. Collateral is for debt, not currency. I really don’t get how you’re not understanding that.

You’re teaching me nothing because you’re the one who doesn’t know what he’s talking about.

 

[Analog Kid]

Dude there is NOTHING in there that says the gold backs the U.S. dollar. Collateral is for debt, not currency. I really don’t get how you’re not understanding that.

You’re teaching me nothing because you’re the one who doesn’t know what he’s talking about.

I agree you're learning nothing, so we'll leave it here.

 

[flmmkr]

I agree you're learning nothing, so we'll leave it here.

Good riddance. The number of times I’ve had to correct you is astounding.

 

[wbeasley]

Just to prove nothing has changed: crypto is gambling

 

[onenorth]

I'm unable to read the article as it's behind a paywall. However, customers are not paying the miners. That is simply not true. The miners are being incentivized to shut down or reduce their operations during high demand periods. Here is another article that explains how the system works.

Environmental group blasts ERCOT policy to pay cryptocurrency mining companies to stop operations during peak power demand

The executive director of the group Environment Texas believes the state power grid operator should pay residential customers for conservation instead.

www.kvue.com

Those programs are available to any company, not just miners. There are residential applications as well where residential customers receive credits for shutting off things like AC during high demand periods, or giving the power company the ability to shut it off for them. A lot of states have similar programs. You can't really blame miners for taking advantage of it.

The amount of your gaslighting is astounding.

Even you admit that the miners are taking the credits, right after you deny that the miners are getting paid to stop mining. The NYT article says that "Bitdeer would make more than $18 million for not operating, from fees ultimately paid by Texans who had endured the storm." Those credits don't grow on trees, you know.

 

[flmmkr]

The amount of your gaslighting is astounding.

Even you admit that the miners are taking the credits, right after you deny that the miners are getting paid to stop mining. The NYT article says that "Bitdeer would make more than $18 million for not operating, from fees ultimately paid by Texans who had endured the storm." Those credits don't grow on trees, you know.

I did not deny the miners are getting paid to stop mining. I said the miners aren't being paid by the customers to stop mining.

Sure in a roundabout way the miners get money from the power company and the power company gets money from the customers. Okay, still the program is available to all companies, not just miners, and even the residential customers have access to those programs. Like I said, you can't blame the miners for taking advantage of the program that was already there. Also, the residential customers would be paying those higher rates whether the miners were there or not. The way the Texas power grid is designed and the way the power companies operate was already in place before the miners moved there. This has only been an issue in the last few years as Texas has seen much more extreme weather.

 

[wbeasley]

15 pages on and there is no conclusive proof this isnt a scam.

Time to drop it. The tangential arguments arent changing minds.

In fact, the more off beat the musings, the more I believe it is all a shakedown.

 

[onenorth]

Also, the residential customers would be paying those higher rates whether the miners were there or not.

Do you have a source for this?

Edit to add: I will gladly gift the NYT article so you can read it, but I doubt you are interested in a contrary viewpoint.

 

[flmmkr]

Do you have a source for this?

Edit to add: I will gladly gift the NYT article so you can read it, but I doubt you are interested in a contrary viewpoint.

Here are some articles that tell a little bit about how the Texas power system is different than other states, as well as how the power usage in the state has increased in the last few years as a lot more people moved there.

The NPR article is from February 2021, which is before the miners moved to Texas (which was after Bitcoin miners left China in the middle of 2021).

Why Some Texas Residents Now Face Huge Electricity Bills

Texans who managed to keep the lights on during the winter storm are getting sky-high electric bills, the product of a deregulated industry that allows power companies to charge variable rates.

www.npr.org

Here's the Average Electric Bill in Texas (and How to Save)

The average Texan pays more money for electricity than other Americans. But you can fix that.

www.cnet.com

Why have Texas’ electric bills gotten more expensive and volatile? | Houston Public Media

In Houston, the energy capital of the world, low prices are not a given. Experts would like to see more capacity and more conservation.

www.houstonpublicmedia.org

The Average Price of Electricity in Texas is Increasing. Here's Why!

You may have noticed that electricity rates are slowly increasing. GoodCharlie Energy has the scoop on why this is happening!

goodcharlie.com

I was able to get to the article with a Google search. I'm not disputing that the miners are being paid when they shut down their equipment. That doesn't change the fact that power issues existed in Texas before Bitcoin miners moved there.

Edit: Here's another:

Texas Energy Crisis: Why Is the State's Power Grid So Fragile? | Earth.Org

As temperatures soar to record levels, all eyes are on Texas, waiting for its power grid to face yet another disastrous malfunction. But why do these failures keep happening in Texas specifically? And how do we avoid Texas' energy crisis from spurring out of control?

earth.org

 

[flmmkr]

15 pages on and there is no conclusive proof this isnt a scam.

Time to drop it. The tangential arguments arent changing minds.

In fact, the more off beat the musings, the more I believe it is all a shakedown.

No proof it is. Proof is the burden of the accuser.

 

[wbeasley]

No proof it is. Proof is the burden of the accuser.

15 pages in you cant provide anything to change our minds, for all the words and links and graphs you've provided ... why bother providing all that if the burden is on us to prove it is a scam?



in fact, i'd say many other comments have backed it up pretty effectively with their understanding of how it works.
theyve shown it makes no money unless more people pony up.
and making money requires pulling out of the pool at the right time.
where those left need to wait for more "investors" to put in...

hence the need to heavily promote it to attract new people and money...

 

[Analog Kid]

Bitcoin: No one has proven it's a scam.


That would make a great tagline for an investor brochure.

 

[wbeasley]

Bitcoin: No one has proven it's a scam.


That would make a great tagline for an investor brochure.

it's always "if you had bought a BitCoin ten years ago for $10 it would now be worth $1000000" or similar claim.

that preys on a gambler's mindset: "look how much they made easily".

that's the carrot.

 

[flmmkr]

I could easily say the U.S. dollar is a scam. You ask how? I provide evidence that it's lost 98% of its purchasing power since 1971, for everyone, not just a few people that have it or use it.

You say Bitcoin is a scam. I ask how? You don't provide anything that shows it's a scam. You only say it's used by criminals (the U.S. dollar is used more by criminals) or the price is too volatile and the price crashes up to 80% in a bear market. That doesn't make Bitcoin or all of crypto a scam.

When you make an accusation that someone or something is a scam you provide evidence to prove it. You haven't done that, because there is no evidence, because it's not a scam.

Again, there are scams in crypto. There are also scams in traditional finance. That doesn't mean people should stop using both. People need to be careful and watch out for themselves. If you don't like the volatility or the risk then stay away from it.

 

[nostradumbass]

I could easily say the U.S. dollar is a scam.

Yeah goldbug clowns and bitcoiners can say that in the US because they have free speech.

Go to China and say the yuan is a scam and you end up in a dark hole.

China invented the concept of printing money. Go ahead brave boy. Go to Beijing, stand on a crate in the middle of a street and tell them the yuan is a scam.

 

[flmmkr]

Yeah goldbug clowns and bitcoiners can say that in the US because they have free speech.

Go to China and say the yuan is a scam and you end up in a dark hole.

China invented the concept of printing money. Go ahead brave boy. Go to Beijing, stand on a crate in the middle of a street and tell them the yuan is a scam.

What does that have to do with anything here? We're not in China, and I don't care about China. I gave an example of a claim about a scam and provided evidence. You can't do that with Bitcoin because there is nothing that actually shows it is a scam.

 

[wbeasley]

What does that have to do with anything here? We're not in China, and I don't care about China. I gave an example of a claim about a scam and provided evidence. You can't do that with Bitcoin because there is nothing that actually shows it is a scam.

Sorry but so many on here have explained why it is a scam. repeatedly.
That you ignore their answers is not their fault.

Someone invents a "money system" that requires huge amounts of energy and complex algorithm to "mine" something that exists only in the distributed online world. Even feel the need to create images of real coins with a B on to legitimize it...

Convinces others to either mine their own (or better yet install sly software on other people's computing devices and use their power to generate a coin for you...) and then tell everyone how wonderful an "investment" it is and now they can buy them with real money.

Real money comes in.
First "investors" pull out their share for newly injected real cash...

system value crashes, people lose money.
"now is the time to buy while cheap" encourages new people to put money in.

cycle continues.

this is the essence of a scam. as long as you convince new people to put real money in it continues.

 

[flmmkr]

Sorry but so many on here have explained why it is a scam. repeatedly.
That you ignore their answers is not their fault.

Someone invents a "money system" that requires huge amounts of energy and complex algorithm to "mine" something that exists only in the distributed online world. Even feel the need to create images of real coins with a B on to legitimize it...

Convinces others to either mine their own (or better yet install sly software on other people's computing devices and use their power to generate a coin for you...) and then tell everyone how wonderful an "investment" it is and now they can buy them with real money.

Real money comes in.
First "investors" pull out their share for newly injected real cash...

system value crashes, people lose money.
"now is the time to buy while cheap" encourages new people to put money in.

cycle continues.

this is the essence of a scam. as long as you convince new people to put real money in it continues.

Your scenario does not reflect Bitcoin. The only people that have lost money with Bitcoin are those that sold while it was down. That happens with stocks too. No "investors" pulled their money out that took anything away from anyone else. If people took profits while Bitcoin was up, and Bitcoin went down afterwards, if anyone who could have sold while it was down instead held onto what they had, they are up at this point, and potentially up a lot. That is not a scam.

A scam in the sense you are referring to is one where someone puts their money in and they can't get it out. Bitcoin is not like that.

If you're now going to say something like "oh what about FTX" don't bother. That's a different situation, and the same thing has happened with traditional finance. Or "oh what about hacks". Again, different situation that has nothing to do with Bitcoin. If you hold Bitcoin in a wallet and don't lose the keys and don't give the keys to anyone your Bitcoin is safe.

Bitcoin itself is not a scam. The same applies to many cryptocurrencies.

 

[wbeasley]

Your scenario does not reflect Bitcoin. The only people that have lost money with Bitcoin are those that sold while it was down. That happens with stocks too. No "investors" pulled their money out that took anything away from anyone else. If people took profits while Bitcoin was up, and Bitcoin went down afterwards, if anyone who could have sold while it was down instead held onto what they had, they are up at this point, and potentially up a lot. That is not a scam.

A scam in the sense you are referring to is one where someone puts their money in and they can't get it out. Bitcoin is not like that.

If you're now going to say something like "oh what about FTX" don't bother. That's a different situation, and the same thing has happened with traditional finance. Or "oh what about hacks". Again, different situation that has nothing to do with Bitcoin. If you hold Bitcoin in a wallet and don't lose the keys and don't give the keys to anyone your Bitcoin is safe.

Bitcoin itself is not a scam. The same applies to many cryptocurrencies.

you saying it isnt a scam isn't proof...

there will come a time when people take out profit and some take out a loss that there will be no money left in the pot. probably for the majority of people who own crypto...

it's like a sideshow trickster "pick the cup". most dont win.

 

[wbeasley]

Cryptocurrency Is a Giant Ponzi Scheme​

By Sohale Andrus Mortazavi

Cryptocurrency is not merely a bad investment or speculative bubble. It’s worse than that: it’s a full-on fraud.

ryptocurrency is a scam.


All of it, full stop — not just the latest pump-and-dump “shitcoin” schemes, in which fraudsters hype a little-known cryptocurrency before dumping it in unison, or “rug pulls,” in which a new cryptocurrency’s developers abandon the project and run off with investor funds. All cryptocurrency and the industry as a whole are built atop market manipulation without which they could not exist at scale.




This should surprise no one who understands how cryptocurrency works. Blockchains are, at their core, simply append-only spreadsheets maintained across decentralized “peer-to-peer” networks, not unlike those used for torrenting pirated files. Just as torrents allow users to share files directly, cryptocurrency blockchains allow users to maintain a shared ledger of financial transactions without the need of a central server or managing authority. Users are thus able to make direct online transactions with one another as if they were trading cash.


This, we are told, is revolutionary. But making unmediated online transactions securely in a trustless environment in this way is not without costs. Cryptocurrency blockchains generally don’t allow previously verified transactions to be deleted or altered. The data is immutable. Updates are added by chaining a new “block” of transaction data to the chain of existing blocks.


But to ensure the integrity of the blockchain, the network needs a way to trust that new blocks are accurate. Popular cryptocurrencies like Bitcoin, Ethereum, and Dogecoin all employ a “proof of work” consensus method for verifying updates to the blockchain. Without getting overly technical, this mechanism allows blockchain users — known as “miners” in this context — to compete for the right to verify and add the next block by being the first to solve an incredibly complex math puzzle.


The point of this process is to make adding new blocks so difficult that meddling with the blockchain is prohibitively expensive. Though the correct answer to these puzzles can be easily verified by anyone on the network, actually being the first to find the answer requires an enormous amount of processing power — and thus electricity — and outcompeting the rest of the network is impractical.


For their troubles, miners collect a reward for being the first to verify the next block. The Bitcoin blockchain adds a new block every ten minutes, and the block reward is currently 6.25 newly minted bitcoins, worth nearly a half million dollars at Bitcoin’s last all-time high. Competition for block rewards has led to a computing power arms race as prices have risen. Mining bitcoins on a personal computer is no longer feasible. The majority of cryptocurrency mining is now conducted in commercial mining farms, essentially huge warehouses running thousands of high-powered computer processors day and night. The electricity expended mining Bitcoin and other cryptocurrencies is rapidly approaching 1 percent of global usage, which is famously greater than the total electricity consumption of many smaller developed nations.


Given that cryptocurrencies don’t produce anything of material value, this enormous waste of resources renders the whole enterprise a negative-sum game. Investors can only cash out by selling their coins to other investors — but only after the miners and various cryptocurrency service providers take the house’s rake. In other words, investors cannot — in the aggregate — cash out for even what they put in, as cryptocurrencies are inefficient by design.


This makes them a poor and costly form of currency and absolutely ludicrous as a long-term investment. We could dismiss them as a doomed experiment in the “greater fool” theory of investing, in which investors attempt to profit on overvalued or even worthless assets by selling them on to the next “greater fool” — think of it as gambling on a high-stakes game of musical chairs — if the rising price of Bitcoin and other cryptocurrencies were simply a function of demand.


This isn’t the case. Price manipulation plays as much or more of a role than demand in driving prices higher.

(I copied it so you didnt need to click a link that I posted before)

 

[flmmkr]

you saying it isnt a scam isn't proof...

there will come a time when people take out profit and some take out a loss that there will be no money left in the pot. probably for the majority of people who own crypto...

it's like a sideshow trickster "pick the cup". most dont win.

You saying that will happen doesn't mean it actually will. Bitcoin has seen multiple drawdowns between 50% and over 90%. It's still here. Hasn't gone to zero even though that's been said numerous times since day 1. It's currently higher than ever, and now institutions, corporations, states, and countries are adopting it. It's becoming ingrained into the global economy. Bitcoin isn't going anywhere.

 

[flmmkr]

Cryptocurrency Is a Giant Ponzi Scheme​

By Sohale Andrus Mortazavi

Cryptocurrency is not merely a bad investment or speculative bubble. It’s worse than that: it’s a full-on fraud.

ryptocurrency is a scam.


All of it, full stop — not just the latest pump-and-dump “shitcoin” schemes, in which fraudsters hype a little-known cryptocurrency before dumping it in unison, or “rug pulls,” in which a new cryptocurrency’s developers abandon the project and run off with investor funds. All cryptocurrency and the industry as a whole are built atop market manipulation without which they could not exist at scale.




This should surprise no one who understands how cryptocurrency works. Blockchains are, at their core, simply append-only spreadsheets maintained across decentralized “peer-to-peer” networks, not unlike those used for torrenting pirated files. Just as torrents allow users to share files directly, cryptocurrency blockchains allow users to maintain a shared ledger of financial transactions without the need of a central server or managing authority. Users are thus able to make direct online transactions with one another as if they were trading cash.


This, we are told, is revolutionary. But making unmediated online transactions securely in a trustless environment in this way is not without costs. Cryptocurrency blockchains generally don’t allow previously verified transactions to be deleted or altered. The data is immutable. Updates are added by chaining a new “block” of transaction data to the chain of existing blocks.


But to ensure the integrity of the blockchain, the network needs a way to trust that new blocks are accurate. Popular cryptocurrencies like Bitcoin, Ethereum, and Dogecoin all employ a “proof of work” consensus method for verifying updates to the blockchain. Without getting overly technical, this mechanism allows blockchain users — known as “miners” in this context — to compete for the right to verify and add the next block by being the first to solve an incredibly complex math puzzle.


The point of this process is to make adding new blocks so difficult that meddling with the blockchain is prohibitively expensive. Though the correct answer to these puzzles can be easily verified by anyone on the network, actually being the first to find the answer requires an enormous amount of processing power — and thus electricity — and outcompeting the rest of the network is impractical.


For their troubles, miners collect a reward for being the first to verify the next block. The Bitcoin blockchain adds a new block every ten minutes, and the block reward is currently 6.25 newly minted bitcoins, worth nearly a half million dollars at Bitcoin’s last all-time high. Competition for block rewards has led to a computing power arms race as prices have risen. Mining bitcoins on a personal computer is no longer feasible. The majority of cryptocurrency mining is now conducted in commercial mining farms, essentially huge warehouses running thousands of high-powered computer processors day and night. The electricity expended mining Bitcoin and other cryptocurrencies is rapidly approaching 1 percent of global usage, which is famously greater than the total electricity consumption of many smaller developed nations.


Given that cryptocurrencies don’t produce anything of material value, this enormous waste of resources renders the whole enterprise a negative-sum game. Investors can only cash out by selling their coins to other investors — but only after the miners and various cryptocurrency service providers take the house’s rake. In other words, investors cannot — in the aggregate — cash out for even what they put in, as cryptocurrencies are inefficient by design.


This makes them a poor and costly form of currency and absolutely ludicrous as a long-term investment. We could dismiss them as a doomed experiment in the “greater fool” theory of investing, in which investors attempt to profit on overvalued or even worthless assets by selling them on to the next “greater fool” — think of it as gambling on a high-stakes game of musical chairs — if the rising price of Bitcoin and other cryptocurrencies were simply a function of demand.


This isn’t the case. Price manipulation plays as much or more of a role than demand in driving prices higher.

(I copied it so you didnt need to click a link that I posted before)

Well if we're just going to copy and paste...

Is this a $1.3 trillion Ponzi scheme, or are bitcoin investors finally moon-bound?

At US$67 000,00 per coin, Bitcoin (BTC) is once again the talk of the town, having briefly topped its previous all-time high by trading at US$69 210,00. Last night, sitting at the dinner table, my family grilled me on ‘what the hell investors were getting in exchange for over R1.

www.linkedin.com

No, Advisors, Crypto Is Not a Ponzi Scheme

While the FTX debacle has many Ponzi-like characteristics, most cryptocurrencies do not resemble the infamous schemes.

finance.yahoo.com

Busting Crypto Myths: "Bitcoin is a Ponzi Scheme"

In an attempt to discredit Bitcoin, many have attempted to draw parallels between the protocol and a fraudulent Ponzi scheme.

blog.kraken.com

Why Bitcoin is Not a Ponzi Scheme: Point by Point

Lyn Alden compares and contrasts Bitcoin to systems that have Ponzi-like characteristics, to see if the claim that Bitcin is a ponzi holds up.

www.swanbitcoin.com

Why Bitcoin is not a Ponzi scheme

Is Bitcoin a Ponzi scheme? Explore misconceptions and the reasons behind skepticism in this detailed analysis.

www.withtap.com

Because I like the first one so much:

Is this a $1.3 trillion Ponzi scheme, or are bitcoin investors finally moon-bound?​

By Gareth Stokes
Head: Content and Communication Strategy @ Stokes
Media | Specialist Financial Writer


March 7, 2024
At US$67 000,00 per coin, Bitcoin (BTC) is once again the talk of the town, having briefly topped its previous all-time high by trading at US$69 210,00.

Last night, sitting at the dinner table, my family grilled me on ‘what the hell investors were getting in exchange for over R1.25 million per coin’ while my LinkedIn stream served up a survey that simply required a 'yes' or 'no' response to the question: “Is Bitcoin a Ponzi?”

Neither question is easy to answer, so let us begin with the easier of the two. But before we do, please note that:

this article is provided for educational and entertainment purposes only and should not be considered financial advice; please consult a qualified advisor before making any investment decisions.

​

Surely not a Ponzi?!​

Wikipedia.org defines a Ponzi scheme as “a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors”. Upon reading this definition, the writer’s heart screamed “Bitcoin is not a Ponzi” because of the clear absence of fraudulent interest.

Chat GPT answered the question with far more authority than your writer could muster, concluding: by the Wikipedia definition, Bitcoin does not fit the characteristics of a Ponzi scheme. There is plenty of validation for Chat GPT's answer, and for the writer’s “no” response to the aforementioned LinkedIn poll.

The primary argument is that the crypto asset’s value fluctuates based on market demand and supply and does not promise returns to investors based on the investment prowess of a third party, or anyone else. Nor is there some dodgy ‘bad actor’ hiding in the wings to divert said funds to his or her own pocket.

“Bitcoin operates on a decentralised network where transactions are recorded on a public ledger called the blockchain, and its value is determined by supply and demand dynamics, similar to other commodities or currencies,” the artificial intelligence (AI) language model declared.

If one holds that Bitcoin is a Ponzi, then similar arguments would render gold or the US dollar as a Ponzi too.

​

Insane price action worth exploring​

It is necessary to reflect on recent price movements in the cryptocurrency to further this discussion.

The previous all-time high was set in November 2021 at USD68 982,00 per coin. Over the next half-year, Bitcoin fell to around USD35 000,00 per coin, in May 2022, touched a low of around USD15 000,00 in November of that year, and then took another 12-months to re-visit the USD35 000,00 level, in November 2023. And then, in true BTC fashion, boom - to the moon?

At the time of writing, the world’s dominant crypto asset by market capitalisation was suddenly up 207% over one-year, and 56% up year-to-date early-March 2024. But before you begin your rant about ludicrous triple-digit-returns being instantly scam-worthy, consider that NASDAQ-listed Nvidia Corp, a very respectable company, is up 283% and 92% respectively, over the same time frames.

The entire basket of Magnificent Seven technology stocks delivered an aggregate 110% over 2023.

There are two drivers that explain bitcoin’s turnaround.

The first, is that the United States securities exchange recently started approving so-called ‘spot’ Bitcoin exchange traded funds (ETFs). These ETFs allow investors to gain direct exposure to Bitcoin without having to hold it in a digital wallet.

Reuters.com reported a staggering USD4.6 billion in volume on the first day of trading in these ETFs. And by the end of February 2024, Bloomberg was reporting that Blackrock had seen net cash inflows to its Bitcoin ETF for 32 straight days, including USD520 million in a single day. Retail investor-funded buying action by Grayscale, Blackrock, Fidelity and others are sending the digital coin’s price ever-higher.

Do not discount (sic) the ‘halving’​

The second price-driver is the so-called Bitcoin ‘halving’ event that occurs approximately every four years, and is next predicted for 20 April 2024. This halving is hard-coded into Bitcoin’s protocol to restrict the total life-time issuance of the cryptocurrency to just (sic) 21 million coins, and consequently support its price.

In simple terms, the fee that bitcoin miners receiving for successfully mining a new block of coins reduces by half on the halving date. These miners get rewarded in Bitcoin for providing the computing power required to validate transactions on the distributed ledger that the cryptocurrency operates on.

Michael Saylor, arguably the world’s biggest Bitcoin ‘bull’ offers at least four reasons why the cryptocurrency is worth holding. He rates the crypto asset because it is a store of value due to its fixed supply and decentralised nature; it offers investors a predictable and transparent monetary policy governed by code and consensus and independent from central banks; it benefits from network effects thanks to its growing adoption and increasing acceptance globally, and it delivers security via blockchain technology and robust security features.

Lay investors love his “it either goes to zero or USD1 million per coin” nonchalance.

This writer warns, however, that Saylor’s bullishness is at least in part due to his massive exposure to the asset class. Even Chat GPT agrees: “Yes, it is possible that his personal holdings influence his bullish enthusiasm to some extent,” it said, though any self-respecting attorney would have countered with a ‘leading the witness’ objection based on how the writer prompted this response.

The AI language model conceded, however, that Saylor’s bullish outlook was supported by his assessment of the cryptocurrency’s fundamental properties, technological innovation and potential long-term impact on the financial landscape.

If you speculate, be prepared to lose your shirt​

There is fine line between investing and speculating, nicely explained by Investopedia.com. “The primary difference between investing and speculating is the amount of risk undertaken,” they note. “High-risk speculation is akin to gambling whereas lower-risk investing uses a basis of fundamentals and analysis”.

It is up to you, dear reader, to decide which category the emerging crypto asset class falls.

To conclude this piece, the writer reminds readers that the gambling, get-rich-quick, or Ponzi scheme-worthiness of an opportunity usually derives from a human actor rather than an asset.

So, when a cryptocurrency-based scheme such as Mirror Trading International (MTI) goes to the wall, one should not blame the crypto asset, but the men and women who dreamed up the opportunity aka con or scam. Greedy, unscrupulous individuals or groups could just as easily fleece investors (sic) by offering massive returns from gold or platinum group metals (PGMs) or a venture capital opportunity or a new and innovative method of cultivating milk cultures.

The Kubus scheme, an unfortunate SA export​

Just Google ‘Kubus scheme’ for a 1980s home grown scam that conned many a South African investor out of his or her savings. Finally, if you do have concerns over a financial product or opportunity, take a few moments to telephone your trusted financial adviser.

As this writer lamented to one of his publishers recently:

Why do so many otherwise-savvy South Africans only ask questions after their money leaves their bank account?

You should always ask the hard questions first, and only part with your hard-earned money once you are 100% sure that the opportunity you are investing in is above board.