Howard Marks Calls Bitcoin "A Pyramid Scheme"

[FatCatSenior]

A dinosaur with too technologically backward thinking or does he have a point?

http://www.zerohedge.com/news/2017-07-27/digital-currencies-are-nothing-unfounded-fad-howard-marks-calls-bitcoin-pyramid-sche

[1715674621]

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[JNiks_ZLisa]

He just read this: https://pastebin.com/ZUxTmR99

[Iranus]

pyramid scheme
noun
a form of investment (illegal in the UK and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones.

Therefore, by the literal definition, cryptocurrencies are not a pyramid scheme and anyone who claims that they are is either a liar or influenced by extremely strong biases.

As for it not being "real" - their scarcity system is better than gold.  When people say "an infinite number of cryptocurrencies can be created", it's true, but it's not like there are no other precious metals and resources that people could be speculating about other than gold.

[JNiks_ZLisa]

pyramid scheme
noun
a form of investment (illegal in the UK and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones.

Therefore, by the literal definition, cryptocurrencies are not a pyramid scheme and anyone who claims that they are is either a liar or influenced by extremely strong biases.

As for it not being "real" - their scarcity system is better than gold.  When people say "an infinite number of cryptocurrencies can be created", it's true, but it's not like there are no other precious metals and resources that people could be speculating about other than gold.

https://en.wikipedia.org/wiki/MMM_(Ponzi_scheme_company)

[Iranus]

pyramid scheme
noun
a form of investment (illegal in the UK and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones.

Therefore, by the literal definition, cryptocurrencies are not a pyramid scheme and anyone who claims that they are is either a liar or influenced by extremely strong biases.

As for it not being "real" - their scarcity system is better than gold.  When people say "an infinite number of cryptocurrencies can be created", it's true, but it's not like there are no other precious metals and resources that people could be speculating about other than gold.

https://en.wikipedia.org/wiki/MMM_(Ponzi_scheme_company)

I'm not sure what point you're trying to make here.

That was a company which set a share price.  Bitcoin is an open source project which uses a consensus model and the price is set by a collection of different exchanges which are in no way tied to the project itself.

If you consider it to be a pyramid scheme, then gold is a far bigger pyramid scheme.  The only difference is that Bitcoin is far easier to send, far easier to move in small amounts and has a much better system of scarcity.

[lottery248]

pyramid scheme
noun
a form of investment (illegal in the UK and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones.

Therefore, by the literal definition, cryptocurrencies are not a pyramid scheme and anyone who claims that they are is either a liar or influenced by extremely strong biases.

As for it not being "real" - their scarcity system is better than gold.  When people say "an infinite number of cryptocurrencies can be created", it's true, but it's not like there are no other precious metals and resources that people could be speculating about other than gold.

https://en.wikipedia.org/wiki/MMM_(Ponzi_scheme_company)

I'm not sure what point you're trying to make here.

That was a company which set a share price.  Bitcoin is an open source project which uses a consensus model and the price is set by a collection of different exchanges which are in no way tied to the project itself.

If you consider it to be a pyramid scheme, then gold is a far bigger pyramid scheme.  The only difference is that Bitcoin is far easier to send, far easier to move in small amounts and has a much better system of scarcity.

+1 the early bitcoin, never been as an IPO and nobody promised the coins are with actual value backed. bitcoin is mainly for better freedom movement of secure transaction. bitcoin is not a ponzi at all, else bitcoin wouldn't be completely open source.

[ivrynx]

i think one of the reason that they say it is a pyramiding scheme, is that they don't actually understand how bitcoin is being produces and is being valued, some sites are also using bitcoin as payment for their pyramiding and they are the ones giving bitcoin and othersna bad name, but as far as bitcoin itslef goes, it is far from a pyramiding scheme.

[dothebeats]

These renowned investors, including Warren Buffet might not have the slightest clue of what they're saying about bitcoin. We get it, most of these guys are bankers and trust and support the banking system that's why they keep on saying these negative things about bitcoin. They might be experienced and well-versed in investing but their definition of a pyramid scheme is way off. No one is recruiting anyone to get their money to buy bitcoin. It is the buyer's personal choice.

[The Sceptical Chymist]

I used to think bitcoin was either a pyramid scheme or just a worthless e-currency like Flooz back in the day, but this was in 2013 when I first became aware of it and didn't exactly understand how it worked.  It would be easy to think that,  but the bitcoin community is extremely passionate and the market speaks for itself.   Something that can survive a crash like 2014 and can come back stronger is worth owning.  And no, I don't believe btc is any sort of scheme anymore.

[brian_notgrr]

Earlier this week, Jim Rickards commented in passing that Bitcoin, gold, and USD are all forms of currency.  None has a coupon; none is an investment.  A pyramid scheme refers to a fraudulent investment scheme.  So it doesn't apply to bitcoin.  

Beyond that, the whole notion of currency as a store of value is nonsense.  If currency had intrinsic value, it would be barter, not cash.  Krugman's position -- that the dollar is a store of value because the US Government has lots of guns -- speaks to the government's ability to enforce USD as a medium of exchange world-wide, but says nothing about store of value.  Back when USD could be exchanged for gold,
 you might have had an arbitrage opportunity, depending on where the face value deviates from the market value, but trading dollars for gold,
 even then, was a matter of trading one currency for another.  (Now, where's my Nobel prize, dadgumit.)

Marks, an investment adviser, doesn't feel bitcoin is a good investment.  He's right, by definition.  It is possible though (I'm told) to make a living speculating in currencies (Soros did well for himself eh).  Options:*

1.  Try to identify, and exploit inefficiencies in the marketplace.  In other words, buy the dips.  Good luck with that; if that's your strategy, seems to me like now is the time to sell (for the reasons Marks details.)
2.  Run an exchange (probably the best option).
3.  Bank on the real purchasing power of BTC as opposed to say USD at some point in the future.  In other words, how much stuff will I be able to buy with 1BTC a year from now (if anything), compared with what I'll be able to buy with $2600.  

The latter strategy, which is probably what most of us are banking on, isn't precisely an inflation hedge.  Inflation only looks at one side of the equation, namely the supply of money.  Money, like everything else, is governed by the laws of supply and demand.  What keeps USD afloat is the almost insatiable demand that comes with being the world's reserve currency.  

If you're hedging against the possibility that the USD falls from that lofty perch, you might should be stocking up on canned peaches and toilet paper, rather than BTC. Otherwise, the real question is, what's the emerging demand for BTC.  And that's kind of hard to tell.  

For example, what explains the recent surge in BTC/USD?  Is it just a "better fool" contest?  Or is demand surging?  There have been two events in recent months that could drive demand.
- India's war on cash
- Hot money coming out of China, evidently spurred by worries about devaluation, seeking to dodge capital controls (check the article on real estate values in Seattle, earlier this week on ZH)

OTOH, a couple of recent busts on the dark side show just how transparent the blockchain really is.  That should decrease demand.  I don't think people care about "store of value" as much as liquidity.  But, I think most of our customers care a great deal about confidentiality.

I don't think now is a great time to trade USD for BTC.  If I held Yuan I might feel differently.  But in the long run?  I don't think we are anywhere close to seeing what the demand for this kind of liquidity will prove to be over the coming years.  

It's OK to disagree, of course.  What do I know.  But a pyramid scheme?  Cmon.  It's not so much that Marks is a dinosaur, or an economic illiterate.  He's just a troll.  


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*Mining offers some arbitrage opportunities, but that's off topic

[Soutogu]

I don't think he understood the entirety of the point about bitcoin for calling it out like this. And even less about the whole blockchain tech and the numerous coins popping off this tech. If he doesnt keep an open mind to projects like this he'll get left behind quickly in the tech world  

[Minecache]

He says that because he's pissed he missed out on x100000 returns.

[CyberKuro]

These renowned investors, including Warren Buffet might not have the slightest clue of what they're saying about bitcoin. We get it, most of these guys are bankers and trust and support the banking system that's why they keep on saying these negative things about bitcoin. They might be experienced and well-versed in investing but their definition of a pyramid scheme is way off. No one is recruiting anyone to get their money to buy bitcoin. It is the buyer's personal choice.

Agree, people invest on bitcoin because they believe in bitcoin could be profitable for long term investment instead of just store fiat currency which its value decreases over time. Bitcoin isn't a pyramid scheme but it is a bubble where the value growing because new investors put money into it, and earlier investors could get those money and so on. For the new investors, they have to wait others people buy bitcoin in order to get profits. The point is bitcoin value will stop growing somewhere in the future, but the usability should be increase over time and used as mainstream digital currency in daily life.

[mrcash02]

That is so cliche. People said some years ago, when Bitcoin was starting and many people didn't know about it yet. So, some "expertises" started claiming that Bitcoin was a fraudulent currency, a Ponzi investment, things like this... But the years passed and the facts refuted these people, but seems they don't stop saying the same things.

The guy thinks people buy Bitcoin only to sell it more expensive later, he omits all the features of Crypto-Currency and the accessibility it brings to each user. Or he is unable to see the potential of Bitcoin or he is very dishonest.

[williamuk]

A dinosaur with too technologically backward thinking or does he have a point?

http://www.zerohedge.com/news/2017-07-27/digital-currencies-are-nothing-unfounded-fad-howard-marks-calls-bitcoin-pyramid-sche

'Pyramid scheme' here is a figure of speech. And he does have a valid point.

Until bitcoin becomes a currency used for transactions (for all intents and purposes it is not yet one) its value depends on the influx of new speculative money. Hence the reference to a pyramid scheme.

No to be taken literally.

[flipper55]

A dinosaur with too technologically backward thinking or does he have a point?

http://www.zerohedge.com/news/2017-07-27/digital-currencies-are-nothing-unfounded-fad-howard-marks-calls-bitcoin-pyramid-sche

'Pyramid scheme' here is a figure of speech. And he does have a valid point.

Until bitcoin becomes a currency used for transactions (for all intents and purposes it is not yet one) its value depends on the influx of new speculative money. Hence the reference to a pyramid scheme.

No to be taken literally.

     

Capitalism in general depends on new money, wether by expanding markets, or opening new markets. Industries that don't get new money, die.

[Lorilikes]

This is quite the entertaining load of ignorant crap, I must say.  No offense to the poster, but I am sure he agrees with my sentiment.  Oblivion is bliss, and ignorance is oblivion with an arrogant twist. 
I laughed at this one.  The wrong message is so sadly accepted as fact sometimes too.  This fuels the naysayers and its a shame more people dont debate these types of material.

Thanks for sharing ! 

[jubalix]

even if it was (and its not) its >>> than the pyramid scheme than FIAT, as you can just keep printing FIAT.


sure new money coming in is effectively giving some value over to earlier entrants, but earlier entrants had to take a lot more risks, and the cost of holding for many years.

btc is among other things about locking value at a point in time.

In fiat or other form wealth you are subject to govs policy changes, laws, tax changes etc etc.

That said in BTC you can be subject to scaling debates, and GOX events.

All prior forms of wealth could be taken by force, btc requires reason (if its done right)

BTC also forces trust, it forces you to trust it, if you do not you will be arbitraged to zero, as your FIAT in printed out of existence.

[williamuk]

A dinosaur with too technologically backward thinking or does he have a point?

http://www.zerohedge.com/news/2017-07-27/digital-currencies-are-nothing-unfounded-fad-howard-marks-calls-bitcoin-pyramid-sche

'Pyramid scheme' here is a figure of speech. And he does have a valid point.

Until bitcoin becomes a currency used for transactions (for all intents and purposes it is not yet one) its value depends on the influx of new speculative money. Hence the reference to a pyramid scheme.

No to be taken literally.

     

Capitalism in general depends on new money, wether by expanding markets, or opening new markets. Industries that don't get new money, die.

True but here I'm talking about speculative money. Money that looks for speculative capital gains, not returns from productive activities.

If you read the threads in this forum nearly everyone is focused on the PRICE of bitcoin, past current and future, not it's actual value proposition. The speculative mindset is near 100% predominant with bitcoin.

[williamuk]

even if it was (and its not) its >>> than the pyramid scheme than FIAT, as you can just keep printing FIAT.

  It hurts me to say it but fiat has a value. If you don't get hold of some to at least pay your taxes you'll end up in court :/