Are cryptocurrencies a Ponzi scheme? A heated debate

Cryptocurrencies: between Ponzi scheme and financial freedom

The question is as old as bitcoin itself: are cryptocurrencies a Ponzi scheme? The answer, judging by the tone of the debate, depends on who you ask. For some participants, it is a textbook Ponzi scheme that only holds up as long as new suckers keep coming in. For others, it is the only tool that allows people to escape a monetary system that also works like a pyramid, but one that is centuries old. Several contributors point out that the crypto ecosystem has left behind bankrupt exchanges, tokens worth zero and broken promises.

The Ponzi scheme argument

The most repeated thesis in the thread is that cryptocurrencies, with the exception of bitcoin, are a Ponzi scheme. The reasoning is simple: their value does not come from any underlying asset, but from the expectation that someone will pay more for them in the future. That, they argue, makes them a zero-sum game where the last ones in finance the gains of the first ones.

Some go further and point out that even bitcoin shares that logic. The difference, others qualify, is that bitcoin has a limited supply and a decentralised network that no authority can manipulate. Shitcoins, on the other hand, are a breeding ground for pump and dump schemes and textbook scams.

The comparison with seventeenth-century tulips comes up again and again. So does the comparison with classic Ponzi schemes, where returns are paid with the money of new investors. The conclusion of this camp is that, once fresh money stops flowing in, the castle collapses.

The defence: real utility and individual sovereignty

Against that view, another part of the analysis holds that cryptocurrencies have concrete uses that no traditional bank offers. Sending money across the world without abusive fees, protecting savings from inflation or preventing a government from freezing an account are arguments that come up repeatedly.

It is also stressed that the conventional monetary system works, in practice, like a debt pyramid. Central banks print money, states go into debt and citizens bear the consequences. From this perspective, cryptocurrencies are not the problem, but a response to an earlier problem.

The distinction between bitcoin and the rest is key on this side. While bitcoin is considered an asset with unique properties, altcoins and tokens issued without backing are seen as high-risk bets. Blockchain technology, they insist, has potential beyond speculation.

The human factor: snake oil sellers and misleading advertising

One point of consensus, however partial, is that the crypto ecosystem has attracted a whole fauna of snake oil sellers. The mass advertising of investment platforms, YouTubers promising impossible returns and miracle courses have drawn in savers with no financial knowledge.

That phenomenon is not exclusive to cryptocurrencies, but it has occurred with particular intensity in this sector. The lack of regulation and the opacity of many projects have made it easy for scammers to run rampant. Exchanges, which should be the safe gateway, have been behind some of the biggest disasters.

The conclusion for many is that the problem is not the technology, but how it is used. The same tool that allows money to be sent without intermediaries can be used to set up a fraud within weeks.

The cycle that repeats: bitcoin's announced deaths

Every time the price of bitcoin falls sharply, headlines about its definitive death resurface. Old-timers recall that this has peine dozens of times over the past decade. And that, so far, it has always recovered.

That resilience is, for some, proof that there is something solid behind it. For others, it is simply evidence that cycles of euphoria and panic repeat themselves because human nature does not change. Purchasing power is neither created nor destroyed: it only changes hands.

The discussion over whether bitcoin will surpass 100,000 euros or end up worth zero remains open. What nobody disputes is that the debate between faith and scepticism will not be resolved any time soon.

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Fiat money is also a Ponzi scheme, according to some. The difference is that it has been working for four centuries and no one has found a way to bring it down. Cryptocurrencies have been trying for thirteen years. Whether they will succeed or not is something that, judging by the available data, still has no clear answer.