Virtual Ponzi Scheme Inside - Cryptocurrency Statements Missing

Virtual Ponzi Scheme Inside – Cryptocurrency Statements Missing

The promises of virtual investments were convincing: high returns, no risk of inflation, complete security, absolute privacy, and transferable almost anywhere. Also, there was no interference – no regulations, no taxes, no fees, no bureaucracy. Obviously, this virtual investment will be the best choice in the modern age. Nothing can go wrong with the latest innovation: Cryptocurrency.

Error!

It turned out to be a “hidden” weakness. New buyers were supposed to reward previous buyers and thus attract more new buyers – just as in Charles Ponzi’s plan (and countless others that occurred before and after him). If the sellers outnumber the buyers, the cycle is reversed.

Looks like that day has come. Heavy hitters less in love with being part of a modern movement seem to be selling. Those who fired “investors” likely include a mix of privacy seekers such as dictators, oligarchs, organized crime figures, and ransomware attackers.

Worse still are leveraged fund funds that only offer compound returns if prices rise. Otherwise, they go bankrupt on the bail of investors.

Finally, there are the shoots. Their internal outbursts deliver the same message as canaries dying in a mine: “Get out!” NFTs (no-return tokens) are a good example, but nothing says the party is over like stablecoins.

Stablecoins – created for reasons that undermine all cryptocurrency logic

From Investopedia.com: (Six belongs to me)

“Stablecoins are cryptocurrencies whose value is pegged or tied to the value of another currency, commodity or financial instrument. Stablecoins aim to offer an alternative to the high volatility of the most popular cryptocurrencies, including Bitcoin, which makes such investments less suitable for wide use in transactions.

What? Aren’t cryptocurrencies the best? Remember that when people say “volatility”, they mean risk, which means losses. More importantly, the short-lived popularity of US dollar stablecoins relied on the US Government’s reliance on the currency – what crypto supporters saw as a vile and outdated form of payment and an unreliable store of value.

People have flocked to cryptocurrencies (CCs) to get into the latest financial spree and make big bucks (sorry – big CC gains). But then they learned that the value of CCs (measured in US Government currency!) could go down. Exchange rate? Tie CC to US Dollar. Say what? Why not just discard the CC and use US dollars? Well, when that’s misnamed determinedcoins fell in value in US dollars, the answer was clear: “Get out!”

And here we are Wall Street Journal‘s front page article just reported: “Crypto Meltdown Gets Worse…”

The development that showed the cryptocurrency was a kind of gamble

Following the success of Bitcoin came new virtual currencies, each following a different valuation path. “Get on the ground floor” has become a big bucks making strategy (oops, again – CC’s). Then growth accelerated, creating a roulette wheel of virtual currencies to bet on. The divergent returns highlighted the fact that none of these CCs were “the best”. At this point, the cryptocurrency movement had turned into a guessing game where buyers would flock next. (And then when to exit before rout).

Bottom line: “New” doesn’t mean better or even longer lasting.

Many financial innovations and theories have been created over the years. However, most of them are now gone after common sense hit the reality wall as the number of sellers started to outnumber buyers.

Will cryptocurrencies disappear? Maybe sometimes. However, there are many individuals and organizations engaged in blockchain strategies. Add to this the desire to make big bucks (eg. real money) and there will probably be many attempts to create new, improved virtual things that yield substantial returns for creators – at least for creators.

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