The stock market is built exactly the way you describe crypto: “they only build on the principal of new participants.” The stock market is a zero-sum game and only goes up when new money comes in and goes down when people sell their stocks and withdraw their money from the market. If an exchange is closed, no trading takes place and the prices of all stocks don’t change until trading is open again. I’m guessing you don’t own any stocks since you think stocks are a pyramid scheme. Stocks are purely priced based on a buy/sell order through supply and demand. The price of crypto is determined exactly the same as stocks.
Bitcoin’s valuation is based on pretty much the same thing all commodities are based on, e.g. gold. In other words, people base the value on its intrinsic characteristics just like gold and they buy and sell accordingly. That’s one reason why the SEC has declared crypto coins to be a commodity, not a security. It’s also why people call bitcoin, digital gold. I’m guessing you own no commodities like gold or silver since those are pyramid schemes, too. The value of gold doesn’t change unless someone buys or sells it with new money entering the market or money leaving the market. Gold prices don’t rise on their own. Neither do stocks or bonds or any other investment.
I suppose BlackRock buys billions worth of bitcoin because they want to be fleeced? Virtually every major investment company alows people to invest in bitcoin and ethereum ETF’s and will probably allow others once the SEC approves them. Even Vanguard, the last holdout, finally gave in after their CEO left and is investing in bitcoin. I suppose the SEC approved bitcoin and ethereum ETF’s because they believe it’s a pyramid scheme? Those bitcoin ETF’s are legitimately traded on exchanges and are rapidly filling up the investment portfolios of the country’s largest investment firms and make those available to their customers. I suppose you know better than they do since they make them available to their customers because they want their clients to lose money. The investment company I use allows trading in BlackRock, Fidelity, and Grayscale bitcoin ETF’s as well as Grayscale’s two ethereum ETF’s, and are evaluating others before offering them for sale by doing their due diligence.
In another comparison with gold, the only way the supply of gold increases is if someone mines it out of the ground. Similarly, computers hash algorithms for bitcoin in what’s called mining (essentially they are processing transactions) in order to generate more bitcoin. As a reward for solving these equations, they are awarded mining blocks of that crypto. Miners produce 450 bitcoin a day to put into the market with no more than 21 million that will ever exist. It currently has a lower inflation rate than gold does. I won’t bother discussing the difference between Proof of Work and Proof of Stake except to say bitcoin is an example of the former while ethereum is an example of the latter.
It's amazing to me how many people try to argue that crypto and stocks are the same because they both go up and they both go down and you buy and sell each. Stocks represent ownership of an underlying asset, crypto does not. If I bought a share of Apple 20 years ago and still owned that share now, the underlying asset increased in value: Apple owns more real estate and structures, they own more patents and IP, they have greater brand value and a stronger ability to sell, they own media content and they own a massive supply chain and pipeline to deliver product. Yes there is fluctuation around the current enterprise value that reflects some speculation based on future performance, but it has an underlying, intrinsic value.
If I bought a bitcoin 20 years ago and still owned it now, it has no intrinsic value. It is only worth more today than it was then because the most recent person made an unsecured deposit of a larger amount. It is a pyramid scheme.
Gold is fetishized as an investment and its cost far exceeds its intrinsic value because of intensive marketing, a lack of understanding of how money and macro-economics work, and a general nostalgia for the olden days. Still, like real estate, gold does have an intrinsic value and is also scarce. It is, in itself, useful for many things that gold alone can be used for and there is a limited amount of it to be used for those purposes.
Crypto is not scarce as evidenced by the number new coins that keep getting sold all the freaking time. There is only one element in the periodic table with the atomic configuration of gold. There are many coins that are essentially the same nothingness with different names and there's no real barrier to creating another one and marketing it in competition to the existing set. Bitcoin is a brand name but the coin itself is nothing special beyond the brand loyalty it brings.
The halvenings are just more mysticism around a reduction in maintenance fees. Nobody expects an investment to double if the maintenance fees are cut incrementally. It's an opportunity for hype though and any impact that has on the price is more indication of its poor investment quality.
You, and much of the crypto community, are confusing inflation with the monetary base. The monetary base is a measure of how many units of a currency are in circulation. The monetary base of bitcoin increases with mining. Inflation is a measure of price stability which is not the same thing at all.
From January 2022 to January 2023, BTC denominated prices doubled. A 100% inflation rate. That does not make bitcoin a good refuge from the 7 to 9% the USD was seeing.
As far as restricting the monetary base, we learned some important lessons in the 1930s about the downsides of that strategy as well. If you're proposing a currency more restricted than gold, you'd expect Great-er Depressions to follow.
Investment companies hold crypto because their customers want them to. They make their profits whether their customers win or lose on the trades as long as they manage the assets. If governments, particularly large governments, begin holding crypto reserves then crypto prices will go up which is not the vindication you might think it is, it would simply amount to a massive transfer of wealth from taxpayers to individual crypto holders.
