The Only Truth in saying “Bitcoin is a Ponzi Scheme” is that It is False CINDX Follow Jun 27, 2018 · 6 min read

This article tries to let you know why comparing Bitcoin with Ponzi scheme is such a childish notion. To do so, we show you basic characteristics of Ponzi schemes and try to gauge some reasons why people compare the two completely unrelated and opposite theories of the financial world. The notable part of the write-up is the section that deals with arguments to vilify the comparison of Bitcoin with Ponzi. If you are sceptical about the high returns Bitcoin offers and seem to believe it another Ponzi, have a hang-out to refresh your mind. Or, read this.

Bitcoin has been subjected to many kinds of abuse, and one of the ugliest lies ever attached with it is that the world’s most preferred cryptocurrency is a Ponzi scheme. Well, haters may have a thousand reasons to term Bitcoin a Ponzi, but if you look carefully, you will discover that Bitcoin has nothing to do with the attributes that represent or establish a fraudulent scheme like Ponzi. However, to prove the claim that Bitcoin and Ponzi are similar wrong at the outright, you must first know what a Ponzi scheme is.

Ponzi- the Fraud that never tells a Truth

In a Ponzi scheme, a victim is tricked into investing in a fraudulent company that does not do any business and generates all of its return on investment by attracting more marks to invest in its scheme. That is when, say, first two people invest, the company provides them with an attractive ROI so that they can attract five new people. When these five people invest, the company gives the first two people a return higher than the one possible in real markets.

That attracts more people and with lots and lots of investment, and fewer guys to pay back from these investments, the company that runs the scheme starts earning lots of money. However, this cannot last forever because the company does not profit from sale or revenues of any product or service and when the scheme can no longer attract new and eventually an impossibly large number of investors, it dies, looting huge amount of money from the increasingly growing number of investors who were the unluckiest to invest probably in the last phase of the scheme.

This process of multiplying the number of investors and cheating people usually goes on without letting the investors know the truth that the company does not invest in any product or services. In fact, to lure investors, the Ponzi masters devise attractive false strategies, often disguising with offshore investments or hedge futures trading, so that their portfolio can grow even when there is no base for the investors in real actually to invest in the scheme.

Why Bitcoin is compared with Ponzi — some Most Talked-about Reasons

First of all, people who do not like Bitcoin are either fiat currency bigwigs and/or people who do not know the cryptocurrency deep enough. They check that Bitcoin is something that has the promise of paying back the return in ratios that could never be realised in any fiat policy. For example, Bitcoin provided 2000% return to its investors in just one year in 2017, and an astronomical return like this which occurred purely due to astronomically large demands for the cryptocurrency is always hard to believe for people who keep thinking about an 8% increase.

When our outlook is at the lower end, anything that is new and related with a comparatively complex concept (the mining and rise in the value of Bitcoin) that goes above our limits, we often start to doubt it. Still, there should be a limit of exaggerating the facts, and Bitcoin is no victim to be compared with a Ponzi at all. However, there are more reasons why this comparison takes place. Here are some more.

Another reason why Bitcoin is compared with Ponzi is that Bitcoin’s every growth-phase has attracted an increasingly larger number of investors which is only seen in case of a Ponzi in a fiat world. But, the point to note is that Bitcoin is completely a new ball game that has nothing to do with the features of fiat money. Moreover, the release of each new version of iPhone also attracts an unnaturally large number of crowds, but it is not because iPhone is a fraud, people come because iPhone is a good product. This is somewhat similar to Bitcoin.

There are some other reasons why many compare Bitcoin with Ponzi, but we think we should better discuss why this comparison is baseless rather than keep showing you why this comparison takes place. So, here’s the best part of the write-up.

Why Bitcoin is no Ponzi

The Ponzi scheme runs on a “To rob Peter to pay Paul” policy. Typically, Ponzi schemes need an initial investment that is often not very high, and the schemes promise an impressive rate of returns. Bitcoin is nothing of that sort. Bitcoin is neither robbing Peter nor is it paying Paul. If you invest in Bitcoin, you will earn only if the demand-supply curve bends more towards demand, and you know this when you invest. Moreover, if you want to earn palpably, you will have to invest a significant amount which is not quite affordable like Ponzi schemes.

Ponzi schemes also use vague verbal guises as told above, such as “hedge futures trading”, “high-ROI investment strategy”, or “offshore investments” to portray a positive picture about their income strategy by taking advantage of a lack of knowledge or competence of the investors. Bitcoin is opposite — it is one of the most open theories of all time.

Bitcoin does not need to claim to use a proprietary, secret investment strategy and avoid giving information about how money grows due to Bitcoin investment. In fact, Bitcoin is clear in saying that you may also lose money if you are unlucky, and the process of generating returns in Bitcoin is as clear as an open sky for all not to be doomed by false claims.

Operators of Ponzi schemes also try to diminish withdrawal-rate by providing new plans to unaware investors where money is un-withdraw-able for a certain period to clock higher returns. Bitcoin is a free vehicle, and you can invest or withdraw money invested in Bitcoin as and when you wish. In fact, most of the old Bitcoin investors never keep money invested in Bitcoin although those who do or did so are the ones who have got the maximum return in the past.

The Ponzi scheme operators also fabricate false returns or create fraudulent audit reports when they fail to meet expectations of investors at the ending stages of the process. Bitcoin has nothing to do with false returns, and the most notable point to check here is that Bitcoin has no designated operators at all. There is no third party that benefits when Bitcoin grows; it is the investors who gain when the currency grows. Bitcoin is never going to provide false returns or offer ambiguous audit reports to grow, and till now Bitcoin has never provided anything false about its value or strategy.

If you still think Bitcoin is Ponzi, either you don’t know Bitcoin, or you do not want to admit that Bitcoin is a real phenomenon that is providing astronomical returns in a completely legitimate and ethical manner.

If Charles Ponzi were alive, even he would have invested in Bitcoin.

Sincerely yours,

CINDX Team