Trimmed context:
Agreed. "Self-assembling Ponzi scheme" is the terminology we've been waiting for to describe all this stuff. The concept that a Ponzi scheme does not need a single malevolent organizer at the helm, and can be run by a series of greater-fool-theory investors, is the true innovation of cryptocurrency.
The following does not describe Ponzi schemes:
(1) All processes and data are publicly available and completely transparent. This describes Bitcoin's blockchain software and transaction data - it is transparent. Ponzi schemes which do not hide material information are a rounding error from 0%, in my estimation.
(2) Contributions collapse and the system survives. Bitcoin has gone through multiple 90% crashes and survived. Nearly all Ponzi schemes only collapse once, after which the FBI typically gets involved. If Bitcoin is a Ponzi scheme, what have the FBI done to stop it?
1) I think we have a low standard of transparency. There is no way to look up a person (i.e. a first name last name walking piece of meat, not an account number) and see that they own these specific shares of these specific coins. That would be radical transparency. Instead we have these pseudonymous accounts at "brokerages" and perhaps our trades are routed through a "tumbler" to further obscure who owns what. Additionally, many of these websites we use to transact crypto do not have any physical presence, any identifiable employees, or a phone number. What are they? Who owns them? Where are my assets? Nobody knows.
That's an interesting criticism. Bitcoin's anonymous numbered accounts are closer to a Swiss bank account, and I would agree some number of non-U.S. exchanges obscure their location and employees (even CEO). Within the U.S., the laws and regulation are a different story. Outside the U.S., the situation is more mixed. I'd agree your criticism is accurate for some crypto exchanges, but does not describe others (Larger ones + US based both being correlated with more transparency)
2) The FBI and SEC are afraid to regulate crypto because the politicians who give them orders do not want to be accused of "stifling innovation" or "giving up our competitive advantage in this new industry". It's the same reason we tolerate social media abuses while many European and Asian countries do not. That is not a reason to think crypto is NOT a self-assembling Ponzi. The lack of any one accountable ringleader means that when the new money runs out, it simply looks the same as when stocks go down - a buying opportunity! Self-organizing Ponzies could behave differently in this way than traditional Ponzies. Yes, this is the first time we've seen such a scam, because it required certain technologies and maybe very low interest rates to enable it, but the minor differences between crypto and traditional Ponzies are not a green light by any means.
Maybe we should shift this to the SEC, which might have jurisdiction. The SEC has gone after individuals and crypto exchanges, per the two press releases below.
https://www.sec.gov/news/press-release/2022-37https://www.sec.gov/news/press-release/2021-172Stocks are more regulated than crypto, but let's set that aside for the sake of the metaphor. Stock prices are set by willing buyers and sellers, which includes Coinbase (*) stock. Coinbase is a U.S. crypto exchange, so drops in the price of Bitcoin hurt the company, and the stock. Moving deeper into the comparison, Microstrategy Inc (*) act like a Bitcoin holding company, and it's price is more purely driven by the price of Bitcoin. Finally you have BITO, the largest Bitcoin futures ETF, which has regulatory approval to invest in the Bitcoin futures market. If Bitcoin is a scam, why did BITO gain approval from the SEC? Why was a U.S. crypto exchange allowed to publicly list its stock?
We could talk about the FBI instead of the SEC if you prefer: "The U.S. Justice Department has tapped a seasoned computer crimes prosecutor to lead its new national cryptocurrency enforcement team and announced on Thursday that the FBI is launching a unit for blockchain analysis and virtual asset seizure."
https://www.reuters.com/technology/fbi-form-new-digital-currency-unit-justice-dept-taps-new-crypto-czar-2022-02-17/To me, that article shows the FBI more committed to going after crypto related crimes, but not shutting down crypto in general or Bitcoin specifically. And it goes even higher than the FBI, reaching up into the U.S. Justice Department, so I don't see a disconnect between the FBI and government.
(*) I recently opened short positions in Coinbase and Microstrategy stocks. I didn't just get out of crypto - I shorted it! But I really should have listened to that poster who suggested buying COIN put options - oh wait, that was me.
