Bitcoin could be the biggest scam and Ponzi scheme ever perpetrated, according to the Gravel Institute, a progressive think tank that compared the world’s No. 1 cryptocurrency to a form of fraud that promises high returns but pays earlier investors with funds from new investors. With no legitimate profit to sustain the process, the whole thing inevitably collapses.
Charles Ponzi, for whom Ponzi schemes are named, swindled naïve and greedy Americans out of $15 million in the early 1920s. Bernie Madoff pulled off the largest Ponzi scheme to date, conning thousands of investors out of $20 billion in principal funds. He was arrested in 2008 and died in prison on April 14 at age 82.
There is little difference between how Bitcoin operates and a Ponzi scheme, according to the late Mike Gravel, a former Alaska senator and two-time U.S. presidential candidate who founded the New York-based Gravel Institute. Gravel died on June 26, 2021 in Seaside, California.
Bitcoin, a digital token with no central bank or single administrator, is run by a global decentralized network of computers that keep track of every Bitcoin transaction and can move bitcoins easily from one user to another.
In just over a decade, Bitcoin has become a household name and part of everyday life as the crypto community grows exponentially in tandem with the sometimes high returns of digital assets.
Crypto has made new millionaires in a way that no one could have predicted in the wake of the 2008 financial crisis.
A Ponzi scheme is an investment that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. Instead, they use it to pay those who invested earlier and may keep some for themselves.
“A hundred years (after Charles Ponzi), a new bunch of wealthy investors say they too have a brilliant way to make you a lot of money. The best part is, they say the returns are guaranteed! It’s called Bitcoin,” said Doug Henwood, author of the book, “Wall Street: How It Works and for Whom.” Henwood spoke in a YouTube video for the Gravel Institute.
“Bitcoin isn’t really used much as a currency at all. When people buy Bitcoin, they rarely use it to buy goods and services,” Henwood said.
The Gravel Institute also cited author, statistician, and one-time Bitcoin bull-turned-critic, Nassim Taleb. Author of “Bitcoin Black Paper”, Taleb takes a swipe at Bitcoin, claiming that it “can be neither a long or short-term store of value” and that “its expected value is no higher than 0.”
Bitcoin proponents promise high returns on their investment. They say that anyone can buy the digital asset with any amount of money and the returns are guaranteed.
There is a limited number of 21 million Bitcoins in the world and 19 million have already been mined.
Most people buy Bitcoins for speculation, with the hope that their value will go up. The more Bitcoin is used in speculation the less likely it will be used as a currency, according to The Gravel Institute.
“Either Bitcoin is a decentralized, secure currency that can replace the dollar, OR it’s a speculative asset that will make the people who hold it rich with no work. It can’t be both, and Bitcoin people can’t decide which one it is,” the Gravel Institute said in a tweet.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?