Going from memory, a recent Bloomberg article called Bitcoin: "Gold for millennials".
Or, similarly, Peter Thiel said recently [1]: "it's like a reserve form of money, it's like gold, and it's just a store of value. You don't need to use it to make payments."
[1] https://www.cnbc.com/2017/10/26/bitcoin-underestimated-peter...
"Market cap size is critical for adoption of a store of value. It needs to be large enough to “fit” even very large amounts of fiat, ideally without affecting the market. Gold market cap is estimated at 7 trillion USD, which means that even the richest people can move all their assets into gold and not move the market. (At least one at a time. All of them at once will move the market big time).
Bitcoin market cap of about 70B USD is not large enough for even one of the richest people on the planet. This implies that if the market cap does not grow, Bitcoin is likely to fail as store of value."
I wonder if much of the medium term success of Bitcoin has been because the money put in couldn't be laundered readily in any other way, so whilst Bitcoin is a relatively high risk the alternative was just to dump the money without a way to use it?
People actually use other currencies as a medium of exchange first, and store of value second (usually they purchase assets to store value long term).
Bitcoin is the other way round (at present at least).
BTC with its fixed supply works the opposite direction, devoid of inflation: you'd rather keep your BTC as a store of value that will increase, than spend it on goods you can still buy later for fewer BTC.
From a purely economic perspective, cash is just another liquid asset. The distance from currency to store of value is quite short.
Physical assets are generally regarded as stores of value, however, in modern times, currency stability has resulted in currency supplanting durable goods as the primary store of value.
Yes, you would. I'm not clear what you mean by it here:
If you mean Bitcoin, you're agreeing with my point, it's a good store of value first (modulo price volatility and external risks)
If you mean Fiat, don't do that long term, use assets.
And why would it matter what's the "intended" usage of it? Who determines intent? Might every holder of the asset/currency/property (whatever one calls it) have different intentions for it?
From what you described above, every single speculative/overinflated asset would be a pyramid scheme. That's not the case.
The only value in bitcoin is in how much it exchanges for at this point, and that is definitionally a pyramid scheme, because current buy-ins need more adoption to drive the price up so they profit off their investment.
3% of all addresses control 97% of all coins. 0.01% of all addresses control 21% of all coins. And bitcoins mint rate is slowing every four years and almost 80% of all bitcoin that will ever exist already exists.
Its absolutely a pyramid scheme. Early adopters were incentivized with large quantities of limited coins to persuade them to mine and participate when the value was low. Those really early wallets (circa 09-12) amassed over half of all bitcoin ever and are now worth extreme fortunes. Those fortunes are based on demand for BTC, demand for the tiny amounts actually left circulating.
The real question is how much of that old money is actually dead - lost wallets and lost passwords - and how much is just waiting to cash out for absolute fortunes. All it would take is one early wallet carrying thousands of BTC to liquidate to cause a panic.
The way specific ICOs are structured, I could see an argument for some kind of pyramid; but "bitcoin is a pyramid scheme" is easily proved false.
The "profits" for existing investors are paid with money from new investors. So it checks the first requirement to be a pyramid scheme. Now, this isn't explicit, but people still understand that the more BTC investors, the higher the price.
And BTC investors go online and evangelize. They talk about how BTC is a full-proof investment that can only go up-up-UP. Even this thread is full of them. So that checks the second requirement to be a pyramid scheme.
Point 2 has nothing to do with Bitcoin. Yes, there are bitcoin holders that evangelize the currency, but there are plenty that don't.
You are not analogizing correctly - just because you can find a similarity or two between two things doesn't mean one is a metaphor for the other. See Hume's response to the Watchmaker Analogy[1] for more.
[1] https://en.wikipedia.org/wiki/Watchmaker_analogy#David_Hume
> but there are plenty that don't.
Bull. The BTC community as a whole, are evangelists and will point out the multitude of reasons why the price of BTC will trend toward infinity. It's no surprise that, as the financial institutions get more invested into BTC, Bloomberg, et. al. report more on how the price keeps going up! Because the only way to make money on BTC is to find someone willing to pay more than you did for one.
Apple could literally pay a $50/share dividend. BTC could never do that.
I'm not saying a pyramid scheme is a metaphor for BTC, I'm saying it is an instance of pyramid scheme in action. It's just a more modern evolution. The creators were smarter and covered their asses: making it a brand, not a company, hiding their identities, making it pseudo-anonymous.
This is literally true about Apple stock. If I bought $10 of Apple stock 10 years ago I sell it for $84 today, my $74 return is generated by the contributions of new investors.
Yes, I would also have $104 of dividends paid out, but literally 40% of my "profit" comes from contributions of new investors. So does that make Apple stock a pyramid scheme? NO!
That's the difference. Apple generates revenue, BTC does not. If every BTC generated money, then this wouldn't be an issue. But since BTC can't generate money, the only way to profit from it is to get someone else to pay more than you did for it when there's no fundamental reason to do so.
Plus, it can't last forever, like gold can. It has no use like corn does. You literally just buy bits in a distributed database, tell people how it's will be worth infinity dollars because there's only 21 million of them, then sell them for more than you paid. And repeat until you have infinity dollars or the bits are worth less than you paid for them.
Further, your first component leaves out the necessity of a purposefully fraudulent bad actor to redistribute the new investors' "investments" to old investors, instead of investing them. This is clearly impossible with a distributed ledger. Returns (and losses) to all investors, new or old, are equally distributed.
Your second part is clearly much too broad, in a pyramid scheme new members are promised a share of the money taken from every additional member that they recruit.
Simply saying "hey, this could be a good investment" doesn't make something a pyramid scheme, unless Apple is a pyramid because my financial advisor told me and one more client to buy shares of it.
Don't you mean figuratively? An individual who bought $10 of bitcoin a year ago would have made a profit without bringing anybody else to Bitcoin. In a pyramid scheme, the ONLY way to make money is to bring others in.
> Returns (and losses) to all investors, new or old, are equally distributed.
No, old investors can profit while new investors lose money. Or, the new investors paid the old ones. Original BTC investors got them for free, the next generation paid pennies for them, the next paid dollars, then hundreds, and the current generation is paying thousands each.
So should the price collapse, the old generation still stands to make massive profits, at the expense of current investors.
> Simply saying "hey, this could be a good investment" doesn't make something a pyramid scheme, unless Apple is a pyramid because my financial advisor told me and one more client to buy shares of it.
Apple earns a profit, of which a share is provided to owners. That's why it's a good investment.
BTC is a purely speculative investment and literally the only way to earn a profit is to get someone else to buy it for more than you paid. It will never pay you a dividend, it will never generate any revenue.
And you glossed right over this: the necessity of a purposefully fraudulent bad actor to redistribute the new investors' "investments" to old investors.
>So should the price collapse, the old generation still stands to make massive profits, at the expense of current investors.
Nope, the old generation suffers the same losses as the new if the price crashes. A pyramid scheme is just that, a scheme with a central organization controlling the flow of income. That is impossible with a distributed ledger.
The last part of your answer is a rant about Apple vs Bitcoin, I think you missed my only point: in a pyramid scheme new members are promised a share of the money taken from every additional member that they recruit. "Evangelizing" by itself is not proof of a pyramid scheme.
I suggest you continue to look it up and learn what a pyramid scheme is. It's different than speculation, it is different than a Ponzi scheme.
> And you glossed right over this: the necessity of a purposefully fraudulent bad actor to redistribute the new investors' "investments" to old investors.
I did not, but here:
Any person who currently own BTC, and publicly state that it will continue to rise in price indefinitely are bad actors intent on defrauding the public. This applies doubly to individuals with technical or financial backgrounds that claim their are an authority on the subject.
There. You may not agree, but you can't continue to argue that I'm ignoring this point.
> in a pyramid scheme new members are promised a share of the money taken from every additional member that they recruit. "Evangelizing" by itself is not proof of a pyramid scheme.
When evangelizing crosses into market manipulation, then it is.
I feel that people are making claims about the price of BTC can rise, for the purpose of attracting more investors and increasing the price. Thus, attempting to profit from each member they recruit. The margin can be small per recruit, as the audience is literally worldwide.
I do feel that there are evangelists that are primarily motivated by political principals. But I also think nearly every investor is motivated, in some part, by greed.
Market manipulation is not specific enough to qualify as a pyramid. Pyramids have a central org that promises rewards for recruiting; it's not an abstract idea like "make comments on the internet and maybe someone will believe you."
You also left out many qualifying factors, again because they plainly don't fit Bitcoin or your argument.
If you'd like to deride Bitcoin, you'd do better to call it a generic term like "scam." It weakens your argument to call it something specific like a pyramid scheme, which actually has a real definition.
The peons in pyramid schemese usually aren't committing fraud, they don't realise that they're in a scheme, they're not lying, they are really convinced that they found the money tree and if only people buy in it will bear fruit forever.
I still think the analogy is useful.
"The peons in Theranos didn't commit fraud, they didn't realise they were in a scheme, they were not lying, they were really convinced that they found the money tree and if only people buy in it will bear fruit forever".
You can't call every company that has failed a pyramid scheme.
You can't call every company that seeks funds through VC or IPO a pyramid scheme, yet they know that they'll only get rich if others buy in.
Haha, have you ever looked at what Bitcoin owners/speculaters post online?
Founders throw 1k$ in the pot, investors 100M$, the public 1B$, yet the founder has benefited a lot, by being there first.
If people start thinking "he's a con", the company's value will drop to 0. Bankruptcy.
Is the whole stock market a pyramid scheme?
A market isn't a pyramid scheme just because you didn't enter it at the beginning (that's also true for real estate).
The alternative would be a market where you'd benefit more if you enter last, which means there would be no incentive for anybody to enter first and create the market. That's why the alternative doesn't exist and markets do reward the first mover.
You just described any investment. FX market, stock market, housing, etc. It doesn't make them "pyramid schemes".
Yes, bitcoin benefits from having more people participating in it, but so does Facebook, so does Twitter, so does Youtube, so does the Internet, so does the US dollar, so does the stock market, etc etc etc. That doesn't make these all pyramid schemes.
Yes, it is a high risk investment, and yes you could lose 99% of your investment. If you don't have a tolerance for that kind of risk, then bitcoin shouldn't make up much (if any) of your portfolio.
I do think BTC is flying, but some are still sceptical, despite a 100B market cap...
It does plenty already. I live almost exclusively on Bitcoin. I only get income in Bitcoin, I pay with Bitcoin whenever possible, and I have a Bitcoin-funded debit card for when that's not possible.
I do bet on BTC to change the world... so I pay in BTC when I can too!
That being said, is there a way for a bank to always contact you? A bank designed for digital nomads would be a very interesting proposition for me given I'm in banking and am looking to discover new models.
Some banks are already trying to address such needs, like Monese (which I'm also using).
It's also the easiest/cheapest/most open asset to trade (depending on where you trade).
In the long term, Bitcoin can be seen as a safe heaven in case of economic chaos, like gold, but way easier to buy and hold. It can also be seen as an interesting economic experiment: what if currency wasn't managed by a government? Or you can give trading a try for a few $$ as a gamble (with more chances of success than in a casino).
It's also a useful currency in some cases: I'm a "digital nomad" which my bank can't seem to understand. Getting my Debit Card to work online from a foreign country, with an ever changing phone number (they insist on using SMS as a 2FA), sounds like an obstacle to them, but not to BTC.