I’ll make a bold statement: “Crypto Currency is essentially an evolved Pyramid Scheme!" Now, before you stone or mock me, read me out:
What do you call “a dishonest and usually illegal business in which many people are persuaded to invest their money and the money of later investors is used to pay the people who invested first”? well that’s a Pyramid Scheme[1].
Now let me rephrase, what do you call “a technological innovation, which is essentially a digital ledger, created using blockchain technology, in which the money of later investors is used to buy out the people who invested first at a huge premium”? that’s right, this line of code, with no real assets behind it, that you believe will appreciate forever is essentially an evolved Pyramid Scheme.
The first investors already made a lot of money while the new ones keep on inflating this bubble.
It’s not surprising to see celebrities like the Podcast phenomenon Tim Ferriss (https://www.linkedin.com/in/timferriss) promoting this scheme, but it drives me crazy to see mainstream institutional investors recommending a 5% allocation in a household’s portfolios to “digital” “decentralized”, blockchain currency such as Bitcoin. Investors such as Guggenheim Partners' Scott Minerd and entrepreneurs like Elon Musk, as well as guests on financial media eco this message and fuel this speculative frenzy.
Guggenheim's Scott Minerd was quoted saying that a Bitcoin, supposably a one of kind line of code (that's it), should be worth $400K!? really?!
Think for yourself! if it walks, looks and quacks like a duck… it’s a duck! Ask two simple questions: (1) who is behind Bitcoin? and (2) How can you be sure that the amount of Bitcoins is finite? The short answer is that :(1) no one really knows the identity of the person/s and/or organizations behind Bitcoin, and (2) my logic says that if someone programed something, they could always amend it.
As Prof. Robert Shiller said ""Bitcoin is the best narrative possible, it's a mystery based on a person who wrote a brilliant paper that nobody seems to have found (Satoshi Nakamoto)."
Regarding the statement that: “this new decentralized digital currency is the future”, let me remind you that it a Decentralized Currency is a very old idea. Gold was, and still is a decentralized currency. The world relied on gold as global decentralized reserve currency until the US abandoned the Gold Standard (which is a truly innovative idea). The big difference between Gold and digital currency is that Gold has some value beyond speculation and money laundering, and the amount of Gold is really finite.
I know that this article will be very unpopular in some "innovative circles", some would say that I am a relic of an old era, that I don’t understand the new economy and that blockchain cryptocurrency is the future… you should note that I get it, I believe that the blockchain technology is great, I am all for digital securities, NFT's, Tokens, alternative platforms etc., as long as there's some value/asset behind it.
So you tell me, am I the village idiot? or is the emperor naked? [1] Merriam Webster Dictionary
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