Several readers of my most recent op-ed on cyber currencies, “Bitcoin is a Ponzi scheme, and it will collapse like one,” criticized my characterization of cyber currencies, and specifically bitcoin, as Ponzi schemes. I will explain why cyber currencies in fact are akin to a Ponzi scheme even if they are not criminal frauds.
Today’s unprecedented collapse of cyber currency prices reinforces my Ponzi scheme characterization of cyber currencies. Bitcoin, the dominate cyber currency, hit an all-time peak, slightly above $20,000 last Sunday morning before beginning a moderate price slide that accelerated in the early hours of Friday morning Eastern time.
By late Friday morning, Bitcoin’s price had dropped to $11,833, a 41-percent decline from Sunday’s peak. Every other cyber currency reported on the coinmarketcap.com website showed similar, if not greater price declines. The decline in the market value of all cyber currencies exceeds $100 billion; bitcoin alone has lost almost $40 billion of market value.
The collapse of cyber currency prices over the last 24 hours powerfully reinforces my assertion that at their core, cyber currencies are Ponzi schemes, or certainly close Ponzi cousins. This price collapse also destroys any belief that cyber currencies represent a reliable store of value — anything but!
Read more at The Hill.