Why I think Bitcoin will go to zero

Bitcoin is a Ponzi Scheme

Recently I posted a question on several social media channels asking proponents of Bitcoin to describe what they think the value of Bitcoin is. In assessing the responses, I was able to understand the main argument. These responses are not truth, simply the perspective of sentiment of many Bitcoin fans.

1. Bitcoin’s price is $50,000

2. The value of something is what someone else is willing to pay for it

3. I can travel with it

4. It will have a limited supply

5. It’s a better version of the US dollar because the government can’t control it.

If you’d like to see one of the more robust conversations, go here:

https://www.facebook.com/share/p/AkhwDcU2RBdB78rX/?mibextid=K35XfP

From these comments I can identify three key errors of Bitcoin.

1. Value is different from price.

People are generally very confused about the concept of value. They talk as if there is no difference between value and price even though price is a derivative of value. Without value, there can be no genuine price. The example I would give them is that the value of an apple is in its nutritional value which has nothing to do with the price. Even if I never sold an apple, I could still consume the apple and enjoy having it. Since bitcoin cannot be consumed as an “intangible asset”, there is no value in having it. Bitcoin has no value.

2. Having more of something makes you wealthier.

Because Bitcoiners have a poor and sometimes non-existent understanding of value, they also have a fetishization of supply. They only care about something called “purchasing power” which is why they brag about how there will never be more than 21 million bitcoin mined. They claim that if a meteor full of gold hit earth, the purchasing power of everyone holding gold would plummet and they are right in saying this. They are wrong in thinking this is a bad thing! Because gold has value to the ones holding it based on its properties, a world of more gold is a world of more wealth and capabilities. Prices may rise but that’s because there is more wealth in the system to spread. We should want valuable things to be in abundance. It is only the desire to control commerce through financial monopoly that would cause someone to want to choke the supply of goods and services.

Therefore here is why I think Bitcoin will go to zero.

Summarizing the assessment from on my original post, I believe Bitcoin is a pure derivative of the US dollar and similiar to the dollar in that it’s a “intangible asset”. While Bitcoin currently has a price, commenters were unable to articulate any value in holding Bitcoin. Therefore, my assessment is that the price of Bitcoin is derived from The Greater Fool Theory, an essential component to any garden variety Ponzi Scheme. All Ponzi Scheme go to zero. Because fiat and cryptocurrencies are all different varieties of a Ponzi scheme, they too will all go to zero, wiping out all the fools.

Post Script Note:

During the years Bernie Madoff was running his Ponzi Scheme, other more honest investment firms were starved of liquidity and capital, unable to compete with Madoff’s consistent 20% returns. For this reason, those investment firms had a vested interest in preventing Ponzi schemes because they cheat. A couple conclusions can be derived from this.

1. The reason Madoff got away with it for so long is because people didn’t want to look. My belief is that even those other investment firms that were suffering because of Madoffs success knew deep down they were also participating in a type of Ponzi, the US dollar Ponzi scheme.

2. In today’s financialized environment, cheating is driving honest players out of the market. Why offer your clients value when they are satisfied with price? Value is expensive. It eats away at margins. If Madoff could get away with it, why would he go through the effort of making more honest trades when he could just make up successful trades instead?

Therefore, the only thing I can think an honest player can do in such an environment is expose the cheaters, not by complaining but by using their rules against them. Make it expensive for them to cheat by borrowing their money to get actual value while refusing to repay the loans. Go on strike, refusing to trade your valuable time for their dollars. And get rid of all your dollars as fast as possible, trading them for things of actual value.

This is how you exist a Ponzi scheme, as fast as possible.

Secondary post-script note:

I’m happy to concede that bitcoin and the dollar might maintain purchasing power for a period of time because I recognize the propensity of fools to remain foolish. There are so many proverbs about the enticement, temptation, and entrapment of “ill gotten gains”

“Ill-gotten treasures have no lasting value, but righteousness delivers from death.”

“Dishonest scales are detestable but an accurate weight is delightful”

“My son, if sinners entice you, don’t be persuaded.

If they say - ‘Come with us!

Let’s set an ambush and kill someone.

Let’s attack an innocent person just for fun!

Let’s swallow them alive, like Hell,

Still healthy as they go down to the Pit.

We’ll find all kinds of valuable property

And fill our houses with plunder.

Throw in your lot with us,

And we’ll all share our money’ -

My son, don’t travel that road with them

Or set foot on their path,

Because their feet run towards trouble

And they hurry to commit murder.

It is foolish to spread a net

Where any bird can set it,

But they set an ambush to kill themselves;

They attack their own lives.

Such are the paths of all who pursue gain dishonestly;

It takes the lives of those who profit from it.” (Proverbs 1:10-19)

At some point, the dollar and Bitcoin communities will just be cannibalizing themselves attracting the occasional new sucker. If people can be fooled, unrighteous people will exploit that weakness. Only the righteous, those who do what is right and reject all temptation to ill-gotten gain, will survive these deceptions.

I’m actually quite enjoying watching this game play out, watching evil and greedy bastards getting caught in the traps they have set for me and others.

Finally, I can hear the objection that says “The US is funded by a Ponzi scheme and that’s important because it allows the US to strike down other Ponzi scheme (Madoff) and criminals.” I would have those who make this objection acknowledge that at one point, society thought human sacrifice was a necessary component of governance. Now you know the why such societies exist and will realize that you are an advocate for human sacrifice. The new blood you advocate for is just tokenized whereas the Aztecs were more honest with their bloodthirst.