Is Bitcoin A Ponzi Scheme?
Channel: BTC Lighthouse
Date: 07/04/2023

Is Bitcoin a Ponzi scheme? Let’s see.

Charles Ponzi was an Italian-American immigrant who became known for his fraudulent investment scheme, the "Ponzi Scheme." 

Ponzi's scheme began when he discovered an arbitrage opportunity with international reply coupons. He convinced investors to fund his business, promising 50% returns in just three months.

In the July of 1920, Ponzi was taking in millions of dollars from investors. But he paid off new investors with funds raised from older ones, leading to a bank run when his bank accounts were frozen over a lawsuit.

To plug the holes in his balance sheet, he robbed his own bank in which he was an owner. He was eventually declared bankrupt, and he spent much of the next decade in jail.

Bitcoin is not a promise of returns, and the returns are not generated by new investors paying old investors. The returns are a result of an increase in price due to market dynamics of supply and demand.