Gravel Institute says Bitcoin is a speculation with no intrinsic value; calling it ‘a scam’ similar to a Ponzi scheme
Why do you think people invest their money in cryptocurrency? For those of you who have been paying attention to bitcoin roller coaster rides, the answer might not surprise you. The number one reason millions of people buy bitcoins and other cryptocurrencies is because they believe their investment will pay off over the long term.
Others invest in crypto as a way to earn high returns while supporting the future of technology. In finance, this is often referred to as the “greater fool theory.” The idea is actually quite simple–a crypto investor buys a digital asset in the hopes someone else will pay more for it. The problem is that bitcoin has no intrinsic value. Bitcoin is being pumped higher with zero interest rate, free money coming from the Federal Reserve, and stablecoin called Tether. The Tether scandal is a story for another day.
In April, “Black Swan” author Nassim Nicholas Taleb said the world’s most popular cryptocurrency is a “gimmick” and a “game.” In an interview with CNBC, Taleb said bitcoin has features of what he calls a Ponzi scheme that’s right out in the open. Taleb said he believes Bitcoin is “too volatile to be an effective currency and it’s not a safe hedge against inflation.”
Taleb went on to say that, “Basically, there’s no connection between inflation and bitcoin. None. I mean, you can have hyperinflation and bitcoin going to zero. There’s no link between them.” He added that “It’s a beautifully set up cryptographic system. It’s well made but there’s absolutely no reason it should be linked to anything economic.”
However, Taleb is not the only person calling Bitcoin a Ponzi scheme. In early September, we wrote a piece based on a video by Doug Henwood, a writer, economist, and author of Wall Street. Titled, “The Truth About Bitcoin,” Henwood likened Bitcoin to an Italian swindler and con artist named Charles Ponzi. Today, Ponzi has become synonymous with an investment scam where investors are promised substantial returns. Operators of the Ponzi scheme keep their fraud going by luring new clients. Once new investors put their money into the scheme, the money is then collected and used to pay the original investors as “returns.”
In the video, Henwood said Bitcoin “is a scam.” Calling Bitcoin a digital token with no physical or government backing, that’s run by a global decentralized network of computers, Henwood said all of the stuff you hear about “peer-to-peer technology” and “the blockchain” really only explains how Bitcoin works like a currency.
“But despite the name, Bitcoin is not really used much as a currency at all. When people buy Bitcoin, they rarely use it to buy goods and services. They’re really buying access to a Ponzi scheme. Only 1.3 percent of Bitcoin’s economic activity is in merchant transactions. The rest is speculation – people buying it just because they think it will go up.”
Below is Doug Henwood’s video about bitcoin truth.