Cryptocurrency is Akin To a 'Ponzi Scheme', Warns India's Central Bank (techcrunch.com) 185
A top official of India's central bank has compared cryptocurrency to a "Ponzi scheme" and suggested an outright ban in its sharpest criticism just weeks after the government proposed taxation of the virtual digital asset and paved way to recognize it as legal tender in the world's second-largest internet market. From a report: T. Rabi Sankar, deputy governor of Reserve Bank of India (RBI), told an audience at a banking conference that cryptocurrencies have been "specifically developed to bypass the regulated financial system," and are not backed by any underlying cash flow. "We have also seen that cryptocurrencies are not amenable to definition as a currency, asset or commodity; they have no underlying cash flows, they have no intrinsic value; that they are akin to Ponzi schemes, and may even be worse," he said. "As a store of value, cryptocurrencies like bitcoin have given impressive returns so far, but so did tulips in 17th century Netherlands."
Akin? (Score:4, Informative)
You keep saying that word. I don't think it means what you think it means.
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Cryptocurrency is a pump&dump scheme.
Re:Akin? (Score:4, Insightful)
Well, it is not a classical Ponzi Scheme. But it would qualify as a "novel" Ponzi Scheme or as the "latest innovation in the Ponzi-Space". You know, do not rely in old scams stealing your money, get defrauded in a completely new and shiny way! On the other hand, you could also call it a variant of "unregulated trading of fictional stocks" or the like. I think "akin" covers it pretty well.
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Though I agree with the content, I don't like your way of saying it. Making fun of English of a foreign national is not very cool. His English is probably far better than our Hindi. That is in general.
Given that this guy is a bureaucrat from India, steeped in the traditions of British Civil Service, his English too is likely to be far better than many well educated Britons.
Re: Akin? (Score:2)
I was so. definitely. not. making fun of the speech of a south Asian's command of English.
I've generally found South Asians I met speak speak English better than the white Southern Americans that surround me.
https://knowyourmeme.com/memes... [knowyourmeme.com]
Re: Akin? (Score:2)
They speak it better than I, if you take the two mangled sentences above as a writing sample.
Ugh, I need to be able to edit comments.
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I agree crypto is a ponzi scheme. But the twist is, there are people looking launder their black money and willing to lose a percentage. Their loss is the gain for the aiders and abettors of the money laundering schemes.
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You keep saying that word. I don't think it means what you think it means.
Very lame comment. I have the impression that the word "akin" means _exactly_ what this Mr. T. Rabi Sankar thinks it means, and you yourself are the one who doesn't understand its meaning.
And then you quote an old movie in a way that doesn't match the situation at all, since Mr. Sankar does _not_ "keep saying that word", he uses it exactly once. So double lame.
Re: Akin? (Score:2)
https://www.toothpastefordinne... [toothpastefordinner.com]
Re:Akin? (Score:5, Informative)
I believe the point the OP was making is that it isn't 'akin' to a Ponzi scheme. It *IS* a Ponzi scheme. full stop.
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Precisely.
Re:Akin? (Score:5, Insightful)
The goal of everyone in cryptocurrency is to cash out to real money. This requires that they have a next layer of suckers, to buy their crypto at a higher price than they bought in. It's the same thing with penny stock scams, it's the same way the Madoff scam worked. The same exact structures, you can literally take any cryptobro advertisement spiel, replace "crypto" with "penny stock", and it looks exactly like the wave of scams we saw in the late 1990s through 2000s.
There are only two ways to accomplish their goal: pump-and-dump scamming, and the ponzi (pyramid scam) structure of convincing larger numbers of people to buy fractional portions of whatever-the-fraudulent-token is.
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The goal of everyone in cryptocurrency is to cash out to real money [...]
This is simply not true. I have had some cryptocurrency and exchanged most of it for goods and services (i.e. paid). Exchanging it for money does not make much sense to me, particularly now, unless there is something I have to buy with money.
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I have had some cryptocurrency and exchanged most of it for goods and services
I trust you saved those goods and services for a really good party.
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This is simply not true. I have had some cryptocurrency and exchanged most of it for goods and services (i.e. paid).
Ordering killers online does't count.
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Yeah, uhum. People have been cashing out Bitcoin at... ...
2011: 1$
2012: 5$
2013: 100$
2014: 1000$
2015: 250$
2016: 500$
2017: 2000$
2018: 6000$
2019: 10000$
2020: 10000$
2021: 50000$
2022:
This useless magic Internet value with zero intrinsic value that just happens to be completely publicly accessible to all, fully transparent and openly traded but somehow qualifies as a "Ponzi scheme" is going to collapse. Any day now.
I wonder why a central banker would be worried about this completely useless thing.
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Re:Akin? (Score:5, Interesting)
Not quite...
Cryptocurrencies have SOME traits of a Ponzi scheme, some traits of a Pyramid scheme, some traits of a pump-and-dump scheme and some of simple fraud.
But regardless of the number and expression of each of those traits in a given "cryptocurrency product" it is always based on a greater fool theory. [wikipedia.org]
The whole "deflationary" aspect of cryptocurrencies, AKA "To the Moon", dictates that they must be used primarily for speculation based on a promise of built-in constant increase of value.
I.e. Their value stems from the promise of constantly increasing future value.
In other words from faith in those willing to buy into the scheme at a later date, when it will be more expensive than today, "hodlin" out until then.
Faith in people with more money than sense.
Faith in exploiting exploitable fools.
Faith in a scam.
Exact mix and makeup of schemes involved is not that important. What's important is that it is a scam.
Re:Akin? (Score:5, Insightful)
Exact mix and makeup of schemes involved is not that important. What's important is that it is a scam.
And that is the core of it. It may be a shiny new distributed innovative high-tech scam, but it still is a scam and its primary purpose is to separate fools from their money. In addition, proof-of-work does a lot of secondary damage.
Still not quite (Score:2)
The value of any currency is supported by the size of the market for that currency. If shops accept a currency, then the desire to use that currency to purchase goods creates the value for that currency.
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Re:Akin? (Score:5, Insightful)
The culture behind crypto might be similar to a ponzi scheme, but crypto itself is designed to have a use and value within that use.
Not really. It is designed to give the _appearance_ of potential usefulness. But something that was actually intended to be useful would have had a very different design. The scam aspect was part of it from the very beginning.
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Just slightly modified scams, pretending to be "better" and now to have an actual use (yeah, right...). Some people are stupid enough to that you can defraud them multiple times with essentially the same scam.
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Unless you can provide actual proof that every service is a scam, you're blowing smoke. You calling them all scams means literally nothing.
Bullshit. But you are clearly pushing the scam. You should be ashamed of yourself.
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The only "use" for crypto is moving money around with the intentions of either avoiding taxes or possibly paying less fees to take gambling winnings into cash.
It's a great way to launder money. That's a use.
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Seems it would be useful for avoiding economic blockades, such as America specializes in. Sending money to relatives in Iran, Cuba etc.
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It's neither; it's a speculative investment and currency.
One can argue that there is a bubble, but that does not make it any more of a Ponzi scheme than the tulip mania, or the craze around collecting rare Pokemon cards. — Old investors in bitcoin are not paid from new investors; they are paid from the increased value of the product they invested in. Whether the value of that product is a temporary bubble about to burst is irrelevant.
“Intrinsic value” is also meaningless and many things ar
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Old investors in bitcoin are not paid from new investors;
Doesn't it take someone to buy the bitcoin? Just like a Pokemon card is only worth what someone will buy it for, so is bitcoin.
Compare with my chicken currency, takes some care to maintain value, returns eggs for breakfast and is worth a chicken dinner.
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Doesn't it take someone to buy the bitcoin?
Which can just as easily be someone who already has bitcoins, and has had them for longer than the seller has. — Which is in fact more likely given that they are commonly used to buy products and the wallets that belong to stores are often quite old.
The same applies with trading cards, they are typically hoarded by a small number of collectors who were in it for a long time.
Compare with my chicken currency, takes some care to maintain value, returns eggs for breakfast and is worth a chicken dinner.
Yes, there are many goods that are worth something because the demand is created by the practical application, not the greater-fo
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It *IS* a Ponzi scheme. full stop.
Well, it's not. Of course it is a scheme that will end up with lots of bag holders losing more money than the winners win, but because of its decentralised structure it's not a Ponzi scheme. There is no single fraudster behind it.
Re:Akin? (Score:4, Insightful)
A Ponzi scheme is centralized and involves a malicious actor creating an investment scheme that is mathematically guaranteed to collapse.
So... literally what EVERY cryptocurrency scam does "premining" the scam before the ICO. Bitcoin included.
It is (Score:5, Informative)
Crypto fits this definition perfectly. The only people who have ever made money on crypto are:
It's a Ponzi scheme.
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The only people who have ever made money on crypto are:
Those who run the exchanges
Those who bought in and sold before later adopters
You forgot the people who make the mining equipment.
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You do not know what a Ponzi scheme is, your two criteria do not define a Ponzi scheme, and any investment which takes any amount of time to pay of satisfies both of your criteria.
The first investors in cryoptocurrency are not paid by later investors, because no one is paid: one buys a product that one hopes increases in value over time, and are only paid when they sell it again. — That is all that happens.
If the product not increase in value, but decreases, one loses. — It's a speculative inves
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that means that earlier investors are profiting from later investor's losses, however indirectly.
It does not, and this is the fundamental different with a Ponzi scheme.
If the value increase, then everyone who owns it, no matter how early or late he bought in will profit, if it decrease, everyone will loose no matte how early or late he bought in.
All that matters is whether the value has increased or decreased respective to when one bought in, and that increase and decrease is the same for everyone. — If I buy in right now, and sell one nanosecond later after the value has increased by an infinit
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You don't know what a Ponzi-scheme is. — Stop using fancy words you have no idea of what they mean.
Do you also believe that buying real estate under the expectation that it will increase in value is a Ponzi scheme.
Thanks, India! In other news, water is wet. (Score:3, Insightful)
There are three types of people when it comes to crypto:
1. The scammers who say crypto is good.
2. The scammed, who get it in the butt.
3. The good and smart people who realize it's a scam and don't get burned.
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Insightful!
(I'm missing my modpoints today)
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There is a fourth kind.
People who weren't trying to scam anyone, and who happened to buy into it early enough that they were able to make out quite well, and who aren't actively trying to evangelize anyone on the merits of crypto because they realize that the only reason they did well is because they bought in early.
So are stocks (Score:2)
On average, stocks are way over-valued compared to actual company worth, revenue, and assets. They are essentially de-facto tax-havens for the rich.
Cryptocurrency is simply joining the Ponzi Club.
I do own stocks, but realize the party could come crashing down one day upon a societal disruption. But the alternatives may crash also such that there is no risk-free lunch. Diversifying investments is about the best you can do to reduce the chance a crash will take it all, just some.
Non-dividend stocks are also like a ponzi scheme (Score:2, Interesting)
Really, a stock is also ponzi-like, especially if there are no dividends.
The real reason stocks don't collapse is the buy-and-hold philosophy that everyone in the industry pushes.
There is "ownership," but that ownership essentially means nothing.
Re:Non-dividend stocks are also like a ponzi schem (Score:4, Interesting)
Neither is Ponzi-like, and stocks don't collapse because they are actually part of a company. If one manage to buy all stocks, one owns the entire company, even if one only manage to buy half of it, one owns a controlling stake in it.
Cryptocurrency is completely a greater-fool asset with no intrinsic value, but that does not make it a Ponzi scheme, and it is no better or worse in that sense than, say, tulips, or trading cards.
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> Stocks are backed by a real company
As I mention elsewhere, the value of the outstanding stocks are way too high to represent the actual average company worth. So yes, stocks are partially backed by a real asset(s), but does that make stocks say "70% Ponzi"? It's not all or nothing. Ponzi-ness may not be a Boolean attribute.
I will agree though that the ponzi level of cryptocurrency is higher than that of stocks.
Note that I'm using the colloquial version of "ponzi", which implies depending on the next
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This is exactly right and people who compare crypto to stock kinda have a point but seem to ignore what gives value and acceptance of stock as investment is the framework of laws, regulations and procedures that have been built to support the system in which they operate.
Back in the early days of stock markets there were scams a-plenty, many of the laws we have regarding them and the SEC itself were in response to these scams and the dangers of leaving it unregulated. Charles Ponzi wasn't some recent pheno
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Do you really think Tesla is worth $1 trillion?
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That is easy to research if you actually care...
Look at the value of their tangible assets... subtract their debts and add in the value of future sales and growth ( that is the trick)....
You can decide what your 1 share of Telsa is worth and buy more, hold it or sell it.
Re:Non-dividend stocks are also like a ponzi schem (Score:4, Insightful)
The typical trait of a Ponzi scheme is that they only product they sell is their stock. And the only way to profit from buying it is to resell it for more than you paid for it. It's named after Charles Ponzi, a 19th and early 20th century con man, but the scam goes back centuries.
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Shut up with your truth and common sense. We'll have none of that here.
I think the public understands that. (Score:2)
This is just a reminder to get in on it early.
I'm very pleased to hear that (Score:5, Interesting)
Proof of work crypto should never be allowed to happen in the first place. They are highly volatile pure speculations, no coverage in goods or services and they are one of the main reasons why electricity bills for ordinary citizens keep going up, and why I can't get a new GPU at a decent price. I hope you follow through with this, India.
Worse - it's often just a bad bank (Score:5, Insightful)
Stop all 401k contributions (Score:2)
Ponzi doesn't work with publicly listed securities (Score:2)
The principle characteristic of a Ponzi scheme is that the value of whatever is being sold is hidden. For a publicly traded stock, bond, commodity, whatever, the price goes down when people sell it and goes up when people buy it. Everyone can watch that happen, and they know what their share of the pie is worth. This is why security exchanges exist, to track and publish those values.
With Ponzi schemes, early withdrawals are hidden, and the value of the security is artificially inflated. By the time a Ponzi
Tulips? (Score:2)
Had to look that up. That was a blast from the past.
In other words... (Score:2)
Re:What's the difference? (Score:5, Insightful)
Re:What's the difference? (Score:5, Insightful)
Crypto will be a REAL currency when things you want to buy are NATIVELY priced in crypto. Ask any crypto bro how much his lambo costs, he'll tell you *in dollars* because the price in whatever coin du jour is incomprehensible. The instability of the coin is how they are making their money, and by the same sword, the instability of the coin is why nobody (including the crypto bros) trusts it to actually be the standard.
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Thank you, even on darknet markets the drugs are priced in USD.
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The down payment on my house was 6 BTC and 750,000 Dogecoin. I'm 100% serious.
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I call bullshit. I don't believe any seller, mortgage broker, agent, bank, etc. would have agreed to set the down payment explicitly in BTC without first checking it's value against the dollar (unless you were buying the house from your parents of course) . Also, you prove my point. At today's valuation, that's not a down payment, that's better than half of a house. So unless you did this transaction in the last year or so, you'd have been better off with a traditional down payment and using the BTC to
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There is a reason why incorruptible bastions of the US government, like Ted Cruz, or the Texas legislature,
that weird moment when you realize someone isn't actually being sarcastic
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Please link the title company that accepted crypto as payment at closing.
I won't hold my breath.
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But you'd have had to convert your U.S. dollars into Lira to buy one from the source. U.S. dollars didn't stop being currency. Similarly if I open a dealership that only accepts payment in
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You are right on a technical level, but missing the point. What goods besides ransomware and illicit drugs are natively priced in a crypto currency? If they exist I've never seen it. The pretense that "everyone will use bitcoin someday" is just that, pretense, because in reality, you don't want a massively unstable currency as your base currency, and the only thing keeping cryptocurrency in the news is it's massive instability. Once that goes away it will fall off the public's radar, which will then kil
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We may very well be using a crypto-coin for currency in the future. Probably one setup by the US government or the Federal Reserve. It will likely be stable in value and won't swing wildly.
If I had BTC, I wouldn't spend it because clearly sitting on it while it heads to the moon is where the real value is, ie, speculation that I could convert it into a stable currency later.
Not a very useful currency if I don't want to spend it because I'm afraid it's value will double and I'll have missed out.
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Huh? Value of the dollar drops, then Bitcoin costs more dollars, not less.
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Sure, some people have made profits. Even mass
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wish we could see the future for a blink of an eye and you will probably get shocked how in the future there will be hundreds of different currencies, FIAT and non-FIAT.
That sounds like a dystopian future nightmare. What problem does having hundreds of currencies solve? How do I manage them? Does every person have to accept hundreds of currencies to get paid and purchase items? Is everyone a currency trader at all times now?
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We don't need new cryptocurrencies. This reminds me of the moneychangers at the temple in Biblical times, where one had to only have a specific currency that would be accepted for tithing, so the moneychangers would make a mint by overcharging pilgrims. We don't need more company scrip, and another gateway to fleece people who just want to pay bills.
What we need are cryptocurrencies that have privacy built in, have the ability to have the blockchain be pruned, without risking double-spending, take a far l
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Bullshit. Modern money is backed by low risk assets bought on the market. Pieces of real economy.
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It's backed by the guarantee that the US Government will honor it as currency and any debts they take out in that currency. The US has always honored it's monetary obligations.
Why do so many people who seem to distrust and dislike how the Federal Reserve and nation state monetary policy seem to have no interest in understanding how these systems actually operate.
The gold standard is dumb and inflexible and that is why no nation on earth utilizes it anymore. You also don't have to go full MMT but the hones
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Sure, as long as it gets to define (and redefine) what a dollar is.
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Yes, nation states and their central banks get to define their currency. Generally they want control of that and thus we have a USD, a Euro, a Yen, a Yuan, Swiss Francs etc etc. If you think the the USD is overvalued you can trade against it in one of those other currencies. The USD value is set by markets, the Fed can create and consume dollars and set interest rates but it can't just say "Dollars are worth X bushels of wheat today!"
At the end of the day though a USD is just a means of exchange. It ha
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Gold isn't "backed" by anything either if no one actually cares about it or refuses to accept it for services. Then it's just a lump of metal. How far down do you want to go with this?
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And gold is backed by ancient tradition and being shiny. It, just like currency, is valuable because we say it is - it's not particularly rare with modern production techniques. At one point Napoleon hosted a state dinner using aluminum plates because they were exceptionally rare and more valuable than gold at the time. Then we industrialized aluminum production and the price plummeted to where you can buy trinkets and bullshit in specific alloys off the internet for a few dollars.
So really, a "gold back
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You missed the whole conversation leading to my remark - there are always people in these conversations pining for the days of gold-standard currencies because "fiat currencies aren't backed by anything!!!1!!one!1!" as if gold has some inherent, unassailable, universal value.
At the end of the day, it's a shiny rock which only has value because someone says it does. Just like literally every currency in use.
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You can burn paper cash for warmth. You can make stuff out of gold and you can plant tulips. What can you do with cyrpto? Nothing. It does absolutely nothing. Heck, you can burn monopoly money for warmth also.
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Well, even deeper down the rabbit hole, let's say "the shit hits the fan" and we have economic collapse and the dollar is worthless. I have a bakery and a bunch of supplies. You have a wheelbarrow full of gold. How much is a loaf of bread going to cost? That's right, one wheelbarrow full of gold.
Re: What's the difference? (Score:2)
You can warm the whole planet with crypto, mining it. At least proof of work ones.
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You are free to operate in Euro, Yen, Yuan, Francs. Hell if you want to exchange services for gold with someone you are free to do so. It just makes operating in the modern economy more difficult.
Welcome to why every nation on earth gave up the gold standard, because it is inflexible, unscalable and subscetpible to a host of problems that central banking and fiat currencies solve.
If you are a nation state and have a currency that people can put the faith in to use it as means of exchange yes you can print
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Private banks create as much money (and even more debt) as they want, and no central bank has ever even tried to stop them.
The bullshit meter is off the charts with that statement. Did you forget the 2008 financial crisis? That's what happens when the central banks step in. Banks are required to keep a certain amount of cash in reserve by law. [wikipedia.org] When they don't, the central bank steps in. Example:
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For something to be a currency it needs to be stable so you can plan on how to use it. And obviously crypto is not a commodity either -- it's neither fish nor fowl.
My favorite definition is that bitcoin is electricity-wasting Ponzi scheme. That doesn't mean you can't make money off of it, but your timing skills have to be good.
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They are backed by one important difference: a government that demands that taxes be paid in them. — This gives them the intrinsic value of avoiding jail.
Governments can ensure their currencies are not a simple greater fool theory by mandating that taxes be paid in their specific currency. — And since in El Salvador, taxes may be paid in BitCoin, that puts it on the same level as El Salvador's Colon.
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Modern currencies are not backed by anything either.
And there the lying starts. Just like all "crypto" fans.
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Inflation?
Inflation is essentially a tax on not investing your money back into the economy. There are plenty of low-risk ways of making sure your US dollar savings keeps ahead of inflation. Cryptocurrency isn't one of them - you may as well just take your money to Vegas.
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Yeah, because there's absolutely not been any inflationary / deflationary issues with crypto on a DAILY BASIS. Sometimes both in the same day!
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A ponzi scheme involves someone taking money from a group of people and lying about investing anything. If an investor asks they say it's doing great and don't pull your money out. That really isn't like crypto at all. With crypto you're investing and tracking exactly where the money is. But what if everyone suddenly pulls their money out you say? Well try that on the stock market and see how fast alarms are raised and trading is halted. Stocks really aren't much different. They are valued at what the marke
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You must believe that a crocodile is a mammal because it has four limbs.
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So if you guy your NFT with crypto, you're spending nothing to buy nothing? A match made in heaven.