No, Jamie Dimon, Bitcoin Isn’t a Ponzi Scheme. It’s a Grift.
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There’s a controversial accusation washing over the crypto world, especially since assets’ prices have been charging upward. is Bitcoin (BTC USD) a Ponzi scheme? JPMorgan Chase’s (NYSE:JPM) CEO, Jamie Dimon, has been one of the loudest voices spouting this accusation. But, Dimon’s claim is misguided. While Ponzi schemes are undeniably plaguing the digital asset space, I wouldn’t go so far as to say the industry’s cornerstone asset is a Ponzi scheme. However, it’s safe to say the coin has become the vehicle for the great crypto grift that is stunting the growth of blockchain technology.
Dimon is likely very unhappy Bitcoin’s been on the rise in the early days of 2023. The king coin of the industry is a far cry from its highest of highs, but it’s still up by nearly $1,000 to start the new year. As BTC prices continue to rise, investors are calling attention once again to Dimon’s position on the asset.
Since 2017, the JPMorgan executive has been ragging on Bitcoin. Dimon has compared the crypto to the 17th century Danish tulip bulb trend — one of the earliest speculative bubbles. In September, he further doubled down on his claims, asserting to members of Congress that the coin was a “dangerous” and “decentralized Ponzi scheme.”
Sure, Dimon has some legitimate complaints about the industry. In his testimony, he notes Bitcoin has frightening ties to the world of crime. He argues increased regulations could help legitimize the industry. But, calling Bitcoin a Ponzi scheme is a bit disingenuous.
Is Bitcoin a Ponzi Scheme? Hardly.
A Ponzi scheme is, according to Silicon Valley Law Group, defined as “a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by the later investors.”
First of all, Bitcoin is not an enterprise, nor does its community purport it to be. In fact, there are multiple types of blockchains, of which “enterprise blockchains” are one such type. These blockchains are crafted for business purposes, like supply chain management or transaction settlement.
Bitcoin is merely a public blockchain network, meant for sending digital currency from one user to another. That’s it. There is no enterprising involved; in fact, many Bitcoin fans had actively discouraged upgrading the network to support smart contracts and dapps until late 2021.
Not to mention, calling something a “decentralized Ponzi scheme” is quite an oxymoron. CoinDesk’s Christopher Robbins says it best:
“There is no central entity giving these tokens the illusion of value, but instead, the investing public’s willingness to pay $17,000 or $21,000 or $68,000 for one bitcoin determines the ultimate market value of the token.”
There is no body in charge of the Bitcoin empire; in fact, creator Satoshi Nakamoto has all but abandoned the project, save for a cold wallet which has not transacted any Bitcoin since the project’s founding.
Another of the factors which Dimon and computer scientist Jorge Stolfi use to contend that Bitcoin is a Ponzi scheme is that investors invest in it with the expectations of profit. This is true, investors do typically buy BTC expecting to get rich — except for the fact this expectation has only been drummed up in the last several years as BTC has reached the mainstream. Nowhere in Bitcoin founder Satoshi Nakamoto’s white paper is there ever a promise of profits.
Bitcoin: Not a Ponzi Scheme, But a Grift
Bitcoin was never advertised by its creators as a way to make money. It is not controlled by a central entity which pulls all of the strings. And it’s not pretending to be a business, but rather presenting itself plainly as the peer-to-peer transaction tool that it is.
No, Bitcoin is not a Ponzi scheme. More plainly, it’s a vehicle for grifters that many people have fallen for over recent years as BTC has ballooned in price.
As I said earlier, investors buy Bitcoin with the expectation of riches. As Bitcoin’s value climbed from just a few thousand dollars to a high of $68,000 over the course of 2021, the investing world slowly generated a hive-mind idea that Bitcoin is a vehicle for profit rather than the fiat currency it asserts itself to be.
It’s well known that grifters use psychological tactics to lure in victims, and the speculative frenzy of crypto has made identifying victims of these grifts all too easy. Polls have shown that many of the new wave of crypto buyers are not in the industry for the same reasons as early adopters. Where Bitcoin was originally made for a purpose, 63% of investors say they buy crypto only to make money.
The massive growth of Bitcoin in 2021 has been great for bringing attention to blockchain technology. But one of the adverse effects of this growth is an over-saturation of hype. This is then played into by laser-eyed “hodl”-nauts on social media, playing into the speculative excitement with exaggerated tweets about Bitcoin being “the future.” Calling these evangelists Ponzi schemers is being too kind, and it simultaneously overlooks Bitcoin’s long-standing message that it’s an alternative to fiat, not a security.
Distinguishing Scam From Hype Is Key for Crypto
At the end of the day, a bad investment doesn’t make that investment a Ponzi scheme. It just means an investor misjudged that investment’s worth.
It’s crucial for the maturity of the crypto world to recognize this reality, regardless of how hard it might be for Bitcoin investors to admit Bitcoin isn’t actually worth hundreds of thousands of dollars apiece. After putting the wild speculation bred by its fast growth behind it, the blockchain industry can look forward to more widespread adoption brought on by its first mainstream moment. But, labeling Bitcoin as a Ponzi scheme simply because it’s overhyped and has far fewer use cases than other coins like Ethereum (ETH USD) is unique at best.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Brenden Rearick is a Financial News Writer for InvestorPlace’s Today’s Market team. He mainly covers digital assets and tech stocks, with a focus on crypto regulation and DeFi.
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