Bitcoin, Fraud and Scams

Bitcoin is just another ‘Ponzi Scheme’ in disguise

Among the biggest headlines, particularly in the last two quarters of this year, highlights the massive investments into Bitcoin (BTC) by big Wall Street firms. For years, corporate firms have watched the digital currency space with Bitcoin with keen interest. Still, motives to be a part of the revolution that the digital currency ecosystem brings did not come until recently.

The big money guys, including Square Inc.MicroStrategy Inc., and PayPal Holdings, amongst others, have made a significant investment in Bitcoins lately. To a considerable extent, these firms’ involvement contributed to the pump in the price of Bitcoin. For most firms that invested in Bitcoin, particularly MicroStrategy, the Chief Executive Officer, Michael Saylor, has taken up the position of a Bitcoin evangelist, all in a bid to gear everyone to catch in on the fast-moving train.

According to an earlier statement by Michael Saylor who noted that;

“Money is flowing out of conventional assets into #Bitcoin due to the escalating risks of global currency devaluation, technology disruption, social dislocation & political uncertainty. This is not a “rally” or “bubble” – it’s a chain reaction spreading like a fire in cyberspace.”

A statement like this implies that neutral users’ position can be significantly tilted as many may see the need to get a hold of Bitcoin in the belief that Money will continuously flow into the digital asset, which can help shoot up its price. But is this scenario painted going to hold up forever?

Bullish Calls on Bitcoin Can Set the Stage for Mass Cashouts

Like an everyday highly valued item, the increase in its demands evident through its mass purchase can help drive such a thing higher. Bitcoin does not operate differently from this. The continuous stock up of Bitcoin by these institutional investors and retail players can go the bitcoin price much higher.

This growth happens by default, but when Bitcoin Whales like Michael Saylor deliberately take it upon themselves to induce the price rise, many may see an ulterior motive in their calls. A Twitter user @FlorianManner noted that Michael Saylor’s words, as quoted above, is a precursor for a Pyramid or a Ponzi scheme.

If this claim is to be profiled, it will be useful to highlight Michael Saylor and MicroStrategy Inc’s significant motives. The company invested in Bitcoin for two primary reasons: to shun the devaluing dollar by storing its excess cash in BTC while also prospecting to make profits for its investors, as it is a publicly-traded company.

For the latter reason, the company can only make profits from their Bitcoin investments if prices go up, and prices can only go up if more and more people get to stock up on the coins also, irrespective of the amount. This highlights the workings of a pyramid scheme, and when the prices are high enough, the company will take their profits by selling off their stakes, and investors who buy high may suffer more as prices are now bound to be dragged down.

Ponzi or No Ponzi?

Bitcoin is not a Ponzi or a Pyramid scheme as the development, and technical tenets of the currency are innovative and futuristic. While this remains true, the trading activities surrounding the digital currency may take some hints from Pyramid schemes as regulations guarding the space are not yet comprehensive.

Either way, investors are to take caution in the coming year, as big institutional players will need to make moves that will favor their shareholders, a move that may be detrimental to other investors in different parts of the world.

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