Bitcoin Myths, Part 2
Bitcoin FUD Never Changes
No-coiners are always trying to freeze out Bitcoin with their mythology. Thankfully their strange tales hold no power here. Let’s examine their fanciful stories and see more of their weird sagas.
Bitcoin is a Ponzi Scheme
No-coiners love to argue that Bitcoin is a Ponzi scheme. 1 It’s a nonsense claim, but it’s repeated often enough online that we might as well address it. Here’s the version of the argument they usually rely on:
Bitcoin has no cash flow, so any gains come from new buyers
Bitcoin narratives function like a promised return
Early adopters benefit disproportionately
Bitcoin evangelists serve the role of promoters
Bitcoin mining rewards look like payouts funded by newcomers
This is the strongest form of the no-coiner argument, even though it still doesn’t match the definition of a Ponzi scheme. But we’ll walk through it anyway so you can see exactly where it falls apart.
But what is a Ponzi Scheme? Here is how they work. 2
A criminal convinces an initial group of investors to invest in an imaginary company.
Investors lured by the scam give money to the criminal, who keeps it for themselves.
To make it seem like the investors’ money is paying dividends, the criminal searches for new people they can persuade to invest in the fraud.
New investors pulled into the scheme give money to the criminal, who then divides it up among previous investors while perhaps also keeping some for themselves.
Steps 3 and 4 repeat until no new investors can be found, and the scheme collapses.
Already you should see that Bitcoin does not match this pattern. There is no central operator. Bitcoin does not have a company, a business owner, or a fund manager. That alone breaks the Ponzi structure, because every Ponzi needs a head. Bitcoin buyers are not giving money to a single operator and they are not expecting a dividend. They are simply exchanging dollars for Bitcoin.
Without a leader to the scheme, there is no Ponzi.
But let’s be generous to the no-coiner. Could Bitcoin resemble a Ponzi scheme in any meaningful way?
No Cash Flow
The first no-coiner argument is that Bitcoin has no cash flow, so gains must come from new buyers. But this proves nothing. There are many legitimate assets with no cash flow at all. Gold produces no income. Silver produces no income. Oil in the ground does not magically generate dividends. Neither do beachfront properties that sit undeveloped or collectibles that sit on a shelf.
Yet no one calls gold a Ponzi scheme. No one calls beachfront property a Ponzi scheme. No one calls rare art or vintage cars Ponzi schemes.
These assets do not produce cash flow, yet they can still dramatically rise in value because they are scarce, useful, and desired. Bitcoin is the same. Its value grows because people recognize its utility and scarcity, not because it promises payouts to early buyers.
If “no cash flow” makes something a Ponzi scheme, then almost everything becomes a Ponzi scheme. Lack of cash flow only matters if people believe they are investing in a business. But no one thinks Bitcoin is a business. It isn’t a company and it isn’t selling products. It’s legally classified as a commodity, just like gold, silver, oil, and other assets that also have no cash flow.
Hype
Yes, there is hype in the Bitcoin ecosystem and plenty of influencers who talk about it nonstop. But this is not unique to Bitcoin. The same thing happens with other commodities. Gold and silver are promoted constantly, and entire industries exist around selling them.
Don’t believe me? Enjoy this video.
After watching that commercial, does it sound like a gold evangelist? It does to me. Does that make gold a Ponzi scheme? Of course not. Five thousand years of economic history say otherwise.
Gold absolutely comes with big narratives. People say it holds value when fiat collapses. To some ears, that even sounds like a promised return. Yet no one calls gold a Ponzi scheme simply because it has strong promoters and strong messaging.
So yes, gold has its own hype machine. That does not make it a fraud. A Ponzi scheme requires deception, hidden operators, and fabricated returns. Gold has none of that. And Bitcoin has none of that either.
Hype alone does not make something a scam. If it did, every commodity on earth would be a Ponzi Scheme.
Early Adopters Benefit Disproportionately
Did you know you could have bought gold for around $1100 in 2010? And that today it sells for roughly $4000? 3 Early adopters benefited far more than people who bought it last week. The same is true of NVidia stock, Amazon, Apple, and even collectibles like Pokemon cards. When you choose the right asset and you get in early, you are rewarded. Bitcoin is no different.
Mining
Some no-coiners argue that Bitcoin mining is where the supposed theft happens. They claim newcomers buy coins from miners and the miners are the ones running the Ponzi. But think about what Bitcoin mining resembles. Gold mining. Silver mining. Oil drilling.
That similarity is intentional. Bitcoin was designed to mimic the difficulty and cost of extracting hard commodities, but in a digital form. Bitcoin miners use real machines, perform real work, and consume real energy, just like gold miners or oil roughnecks. The economics are parallel. Miners selling an asset they produce is not a Ponzi.
It is literally how every commodity market on earth works.
So at this point Bitcoin looks far more like a commodity than a business. If you want more detail, you can read my Quora article where I explain the structure in depth. 4
Ponzi?
Some people will hear all of this and fall back on a different line: “Fine. Gold is a Ponzi too.” My answer is simple. If everything is a Ponzi then nothing is.
Once you classify every store of value as a Ponzi, the word loses all meaning. It is like calling everything poison, including water. Yes, too much water can kill you, but that does not put water and arsenic in the same category. Blurring those distinctions destroys the concept of poison in the first place.
So let’s keep poison as poison and Ponzi schemes as Ponzi schemes.
Bitcoin is not a business selling promises. And it is not a Ponzi scheme. It functions much closer to a digital commodity.
Final Word
“The beginning of wisdom is the definition of terms.” — Socrates
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DISCLAIMER: This article is for informational and educational purposes only and should not be construed as financial, investment, tax, or legal advice. The author is not a licensed financial advisor, and nothing in this article constitutes a recommendation to buy, sell, or hold any cryptocurrency, gold, or other asset. Cryptocurrency investments are highly volatile and risky, and you could lose all of your invested capital. Past performance does not guarantee future results. Always conduct your own research and consult with a qualified financial advisor before making any investment decisions. The author operates a paid cryptocurrency education course and may hold positions in assets discussed.
https://www.investor.gov/protect-your-investments/fraud/types-fraud/ponzi-scheme
https://www.unit21.ai/fraud-aml-dictionary/ponzi-scheme
https://goldprice.org/
https://www.quora.com/Is-Bitcoin-more-like-a-tech-stock-like-Apple-or-a-commodity-like-gold-in-your-opinion/answer/Jared-Busby-1