Bitcoin may be many bad things – speculative bubble, consumer of energy, vehicle for scams – but it is not a Ponzi scheme.
Charles Ponzi’s particular scam involved financing the returns for his investment fund with new money rather than actual investments; all Ponzi schemes come unstuck when asset values fall and new money dries up.
Bitcoin offers no returns, so it’s not a Ponzi scheme. But what it is, exactly, is more difficult to name. It’s both nothing and everything.
What I mean is that Bitcoin has no substance and is not inherently useful, unlike the objects of previous bubbles, such as Dutch tulips in 1636, the South Sea Company in 1711, Japanese real estate in 1989, or internet stocks in 2000.
Those other bubbles involved the frenzied over-pricing of an existing item that had some inherent utility, and continued to exist after the price crashed and the late speculators went bust.
The Bitcoin bubble
Bitcoin was created from thin air in 2008 and although it was supposed to be a new form of money, it’s clear that will never happen. It won’t be allowed to.
So why are people still paying $30,000 each for them, an amount that could get them decent car or a very nice family holiday?
It’s because, I submit, Bitcoin is a magnet for the victims of modern capitalism, like lottery tickets, and is therefore both a symptom and a symbol of its failures.
It’s now…
