This is just another weekend of terror for crypto. Bitcoin touched $18,000, Ether is struggling to keep $900 and altcoins are being wiped out. Those who sounded pessimistic early this month, predicting $20,000 for Bitcoin, and $1,000 for Ether, are already left behind. There are already voices calling $5,000 for Bitcoin, and $500 for Ether. Even some stablecoins may not be able to survive. But weren't crypto meant to offer a safe haven for inflation? Shouldn't all crypto be at least +10% in value from they were trading one year ago, so the fiat money you spent to buy them would be deflated? The answer is in reality very easy - although you won't like it.

Believing in Santa Claus doesn't make Santa Claus real

You 'invested' in crypto for one reason only: To make quite some quick and easy money. Period. All other fairy tales you feed others about freedom from government, fight back deflation, store value, is just that: fairy tales. You thought - like every other participant in any Ponzi scheme - that you are smarter than others, and that you would cash out with huge profit, while those coming next to you would be the ones holding the bag. Or you thought that if the crypto you bought couldn't go lower, until you discovered it could.

The thing is that you forget the most basic rule of Ponzi schemes: the only ones that make money, are those who enter the scheme first. Yes, those who bought Bitcoin at $100, or $300 are still earning thousands of dollars, but for each one of them, there are thousands losing thousands, or even millions of dollars. Just because they thought that the crypto-asset they bought couldn't go lower. Here is a question for you: if the crypto you bought at, say $30,000, couldn't go lower, why the seller sold it to you at that price? The answer is simple: Because the seller believed it could go lower, and got rid of a liability at your expense.

Remember LUNA? This is a classic. For as long as those buying it, had the belief they were buying a crypto-asset at a bargain price - despite it was trading already over $100 - its price was going up. When things started going to the wrong direction, its price started its meteoric journey to ground zero. And yet, there were quite a few people buying during this journey, because they were convinced that the bottom was somewhere near: at $50, then at $25, then at $10, then at $5, at $2, at $1, and then they discovered that while trying to catch the bottom price, they had pumped hundreds or even thousands of dollars, now worth barely a fraction of a cent.

And I hear you saying that Bitcoin, or Ether, is not Luna. There will be a point where prices will stabilize. First, you can't know what that point may be. It could be any number above zero. Second, for the price to stabilize, you need to get at least as many buyers as sellers, who will believe the price will go up. And those buyers need to be loaded with fiat money. The money crypto-lunatics love to hate. Do you think you will be able to find easily that many guys and gals after they have lost thousands? Who would be ready to make the same mistake for the second, third, or fourth time? If you were Bernie Madoff's client, would you give him any money after the news he was running a Ponzi scheme broke out? Of course you wouldn't, because you would know what would happen to that money Madoff was asking for.

But crypto are not Ponzi schemes!

Sure, they are not. Those who created them had only the intention to make you money, by getting other people's money, selling them digital thin air. Think what is that you buy when you purchase any crypto: The only thing you buy, is the right to resell that crypto for profit within given mechanisms called exchanges (centralized, decentralized, or any name they are called makes no difference), or pay those mechanisms fees for facilitating your transactions. Outside those mechanisms, your cryptos are both useless and worthless. Just like chips in a casino, or monopoly money; if you move them out of those mechanisms, you cannot get any value out of them, until you move them back in.

Crypto are not commodities, because they cannot be consumed in any way. They do not represent products, services, or even contracts to buy any product or service. Even those crypto-assets called utility tokens, do not represent any contractual value. Let's take BAT as an example - they are all the same, anyway. It is supposed to represent contractual value for all three parties: audience, publishers, and advertisers. But what other use is BAT bringing in those transactions, than the right to resell your BAT for profit? How are those transactions performed better by using BAT, rather than good old USD? Answer: They are not! There is no real utility value in those tokens. The only value they had, was to the developer teams selling those tokens, to raise funds for their project, without going through any scrutiny by the SEC.

The funny part is that even if you would buy half (or even all) of the tokens in any project, you'd still own nothing, besides the right to resell those tokens for profit. Yes, there are some rare exceptions that ownership of a token leads to fractional profit-sharing, but those tokens are not 'officially' tradeable in any of those 'mechanisms', since such tokens are not utility tokens - they are security tokens (and yet again, those buying or selling such tokens, do not care about how much they would earn through the profit-sharing aspect). Let's return to the BAT example. Those who buy BAT on those mechanisms, do not care to advertise on Brave browser. They only care whether they have purchased the tokens at the lowest possible price, so they can resell those tokens later for profit.

Same happens with Bitcoin or Ether. Those who buy Bitcoin and Ether do not buy something they will be able to consume in the future. They only buy the right to hope they will be able to resell those coins at a higher price in the future, based on the flawed assumption (thanks to their financial illiteracy) that since those who entered early in the Bitcoin Ponzi scheme are earning multiple times their original investment, same would happen to them in the future, when Bitcoin will be traded at $100,000, or $400,000, or $1,000,000.

The thing is that there is no real value stored in those crypto currencies, as happens with some stablecoins, carried forward to each new owner, so any price is justifiable. How much your Bitcoin will worth in the future, is dependent solely on one factor: the number of new suckers... ehmm... market entrants, willing or can afford to pay more than those who entered the Ponzi scheme the previous day, hour, or minute. It's not a coincidence that most of price growth in the past two years was fueled using free stimulus packages money. Once there was no more of such money left to 'invest', prices started going down sharply.

Then, the stock market is itself a Ponzi scheme

In their early days, when all stock markets and exchanges were unregulated - and at least until 1933 in the United States - any Ponzi scheme could be disguised as a legit company and be publicly traded. To fight back, many countries brought in legislation requiring a minimum amount of capital to form a publicly tradeable company.

There are two major differences, although there are exceptions in both:

a) in stocks, there is some real value included in each unit: Each share represent fractional ownership in a business, leading to certain economic results. Those results are counted and presented publicly periodically, so holders can estimate a fair price for each share they own. Although that fair price may not be the same for all investors, since there are many different ways to estimate fair value, the data to do that are identical. Earnings or losses per share - how much the embedded monetary value was increased or decreased - in any given period of time, must be true and accurate when communicated to investors, and it's a criminal offense presenting false or inaccurate information. Crypto Ponzi schemes only inform their holders about details that are publicly available anyway (e.g. the number of units in existence), and don't have any effect in their inexistent value anyway.

b) in stocks, market manipulation is a criminal offense: Advising people to buy stock in a company, running schemes to pump the price of a stock, presenting false information about a publicly traded company, and a multitude of other activities related to public markets, are criminal offenses, leading to multiple years in prison, and/or fines for the offenders. In the crypto asset Ponzi schemes, market manipulation, misinformation, and outright fraud, is simply the way they operate. In crypto Ponzi schemes, just like in every other Ponzi scheme, you are almost obligated to bring your friends and family in the fraud, and be mocked if you tell anyone about the fraud behind the crypto Ponzi schemes.

Yes, there are exceptions in both sides, but they are just that: exceptions.

But reputable investors are investing in cryptos. Don't they know?

There are two answers in this question.

First, is that they don't know. Ponzi schemes themselves lie in a grey area between investments and fraud schemes. Many reputable, experienced investors, had invested in Bernie Madoff's Ponzi scheme, believing they were investing in a legitimate investment fund. Sometimes, they don't even know they have invested in such a scheme, because they trust those who run those schemes. In some cases, reputable investors were falsely presented to be invested in such Ponzi schemes.

The other answer is that they do know. Madoff himself was a reputable investor, but that didn't stop him from running a Ponzi scheme. Elon Musk knew that Dogecoin was simply a mock to crypto, and it had literally zero value, when he was promoting it through his Twitter account. Who said reputable investors cannot be, or act as, fraudsters? To them, the whole game is to make money at other people's expense, without getting caught doing it.

In the other hand, legendary investors have called crypto anywhere from Ponzi schemes to outright fraud. Among them are Bill Gates, Charlie Munger, and Warren Buffet. And those people have nothing to gain by doing so. Elon Musk, in the other hand, was making millions by supporting Dogecoin. And Kathie Wood is making a living by managing her fund investing in crypto-related businesses.

Who do you think is most probably lying to you? One who has nothing to gain from his/her claims, or one who has something (or a lot) to gain?

Greed will make you believe in anything. Even in Santa Claus.

Dogecoin was created simply to prove that your greed will make you purchase even crypto that were created to be worthless from the beginning. Dogecoin creators never promised anything to anyone. It started its career back in the turn of 2013, at a price per piece of 3.5 cents of a US Dollar cent (that is $0.00035). You could buy thousands with just one dollar. At its all-time highs last May, the purposely worthless Dogecoin was trading at around $0.70. A dollar invested back in January of 2014, would be valued last May at $2,000. Today, Dogecoin is trading at just above $0.05, about 150 times of what it was worth back in January of 2014. This worthless digital thin air coin, has a market cap today, after losing over 90% of its value from its all-time high, of 7.5 Billion (with a B) dollars. On April 16th 2021, close to $70 Billion were traded on Dogecoin. And in the last 24 hours over $1 Billion was traded.

Today, there are 319 similar worthless tokens traded. Their total market cap is over $12 Billion, and over $1.5 Billion in value traded within the last 24 hours. That's more or equal to the external debt of each of the poorest 20 countries in the world, including Liberia, Afghanistan, Gambia, and Sierra Leone.

Crypto Ponzi scheme creators are trying to make you believe there is Santa Claus. And indeed there is one: you!