This Is STILL the Biggest Myth About Bitcoin

0:00is Bitcoin a Ponzi scheme. Let's settle this once and for all. So this is the definitive guide you can send to anyone who says that from now until the end of time. To be honest, I didn't really even want to do this video to address this so-called criticism because it is so baseless and so vapid that it doesn't really deserve a response, but because it's been 16 years and people are still saying it and thinking that they're clever when they say it, I decided to put together a little explainer. So this is like a little 101 level class for the people who don't really seem to understand money, Bitcoin, assets, markets, prices, or of course, Ponzi schemes. And even if you do understand those things, this will still be a fun watch for you to watch me dismantle and dismember the Ponzi scheme claims piece by piece. Real quick, you're watching the sat stacker show, a Bitcoin show for people who think deeper about money. I'm your host, my name is John aka the sat stacker. If you want to learn to stack smarter, you hit the subscribe button and let's give these haters a sat lip. So is Bitcoin a Ponzi scheme? Well, we can start with

1:02the fact that words do have definitions, so we can just do what most of the people who've ever said that couldn't quite figure out how to do, which is Google the actual definition of what a Ponzi scheme is and just read it. From the SEC's definition, a Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier. And of course, they probably keep some of it for themselves. With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit new investors, or when large numbers of existing investors cash out, these schemes tend to collapse. I'm wondering if so far you think that describes Bitcoin, but just remember the key characteristics of a Ponzi scheme, high returns with little or no risk, overly consistent returns, unregistered investments, unlicensed sellers, secretive complex strategies, etc, etc.

2:06Now, I do understand why this is confusing for some people when they first hear about Bitcoin, because magic internet money is a brand new thing. The first of its kind, as John Oliver once said, Bitcoin is everything you don't understand about money combined with everything you don't understand about computers. So of course, it seems complicated at first glance, but I can't stress this enough. Information does exist. Google exists, books, articles, sources, the literal Bitcoin white paper exists, the actual open source code exists, the early communications of Satoshi Nakamoto, all these things exist, along with 16 years of education beyond that, like YouTube videos and podcasts and books, and everything else you could possibly need to try to understand it. Before you go around saying Bitcoin is a Ponzi scheme and essentially announcing to the world that you are unable or unwilling to pursue the act of learning. As the saying goes, it's typically better to remain silent and be thoughtful than speak out and remove all doubt. So now that we've read the definition of a Ponzi scheme and we know that the information exists to see whether or not Bitcoin fits that

3:08definition, this video could easily just be over because it's pretty clear on its face that Bitcoin doesn't really match that definition. It's not an investment fraud that promises high returns with no risk and there are no organizers paying existing investors with funds from new investors, but I am going to go a little deeper and I will be a little fair to the critics. They see an asset they don't understand. They don't know why it has any value, but the market price keeps going up over time. So how can this possibly happen? So they think something nefarious must be going on. So they lobby accusations at Bitcoin like it must be a Ponzi scheme. Never mind that I've never seen anyone lobby the Ponzi scheme accusation at any other asset or investment that they believe has no cash flow or has no intrinsic value. Bitcoin is freely traded amongst global market participants, 24 hours, seven days a week in a global free market of buyers and sellers where the price is determined, of course, by supply and demand. So if Bitcoin is a Ponzi scheme because its value depends on new buyers coming in, then that logic essentially describes every non yielding asset

4:12whose value is derived from market demand rather than promised returns or productive output. So if you honestly extend that definition of a Ponzi scheme, you'd have to label gold, art, land, vintage cars, wine, watches, collectibles, all our Ponzi schemes. And there's of course one more thing, which is the biggest Ponzi scheme of all, which we'll get to a little bit later. But now those assets or investments or collectibles that I just mentioned produce cash flow, of course, their value is based on scarcity, demand, perceived desirability or utility, and trust that others will continue to value them in the future. A Ponzi scheme requires a central operator, deceptive promises of returns, payments to old investors using new investors money, whereas gold, land, and Bitcoin are essentially decentralized assets. There's no promised return. It's just open market price discovery. The value is determined by supply, demand, and utility. That word utility obviously is a buzzword for a lot of people that say Bitcoin has no utility.

5:13So you can say Bitcoin has no utility, but the market disagrees with you. This video isn't totally about debunking that criticism, but we can actually knock out two birds with one stone by saying this. The number one thing that people who say Bitcoin is a Ponzi scheme or Bitcoin has no utility, do not understand is that Bitcoin is not an investment. It's not really even just a new kind of asset. Bitcoin is money, peer-to-peer digital money, with a totally finite supply, is a new form of money that never existed before Bitcoin. That one sentence describes Bitcoin so simply, yet absolutely breaks the brains of millions of people because they just can't wrap their mind around how something digital can be scarce and how it can have so much value. Bitcoin's utility is the fact that Bitcoin is money. Its value comes from the fact that it's money. And the growth in its value comes not from being some kind of Ponzi scheme, but simply from the fact that it's better money than any other form of money that's existed before it. If you just

6:16look at the history of money, what you will see is humans trying out different types of monies over time. In particular, with commodity monies, if something is good at being money, which I've described in many other videos in the past, but I'll say it very briefly here, in short, for a commodity to be good at being money, it must be durable, portable, divisible, fungible, verifiable, and scarce. A lot of people try to say, oh, Bitcoin isn't valuable just because it's scarce. People have said, there's on my head our scarce. My teeth are pretty scarce. I'm pretty useful, but they're not worth billions of bucks. Well, of course, they don't have the first other five properties that I mentioned. And therefore, at this scarcity, just on itself, doesn't matter. But if any commodity good has all six of those properties, it can just enter into a free market competition of monies. People can start monetizing it, using it as money. And if it does a good job of fulfilling those properties and the functions of money, it will become monetized and it will gain purchasing power over time as people store value in it or use it as a medium of exchange for goods and services. But if a better form of money comes

7:18along, it will demonetize the inferior money and suck the purchasing power out of it. Just another video a few days ago, I'll put a link up here where I included a quote from safety and a moose who said, Bitcoin is like financial gunpowder because it's a superior form of money. You don't have a choice whether or not to adopt gunpowder when it was invented. You will either choose to adopt it or it will be used against you. So that's what happens when superior money encounters inferior money in the free market. Salt, beads, shells, tobacco, precious metals. You name it. Many things were once used as money. And for a time, they saw their value grow as they became monetized. They're purchasing power grew as people use them as a store of value. They gained what's called a monetary premium. That means the value of the commodity above and beyond its practical use. Salt being worth more than just its use in cooking or food storage. Gold being worth more than just its value for industrial or manufacturing uses. A lot of people say, oh, gold has real utility because it's used in manufacturing or electronics. Yeah, but that doesn't account for why it's $5,000 an ounce. If it were only value

8:21for its practical value, its value would collapse by 80 to 90% overnight. But just like what happens to salt, beads, tobacco, and all kinds of other crappier monies, if a superior money comes along, people will realize over time that the superior money stores its value better and they'll begin shifting away from the weaker money and storing their value in the better money. Demand for the inferior monetary good collapses, its value collapses back down to its utility value or practical value. And that purchasing power ends up being stored in the harder money. So you can use any example of one money demonetizing another. But let's just say hypothetically, in the 1920s, if wealthy Germans were fleeing the German mark into a harder money like gold and gold's value was increasing, does that make gold a Ponzi scheme? Well, its value is only going up because late entrants are paying more than early entrants did. Of course, anyone saying that would be considered a fool. But that is quite literally what they say about Bitcoin. So yes,

9:23Bitcoin's price appreciation measured in fiat terms depends on demand. But A, that's true of all scarce desirable assets. And B, its demand is not artificially propped up by some central organizer who's promising returns. Its demand comes from organic adoption by people who are coming to the realization that it's better money and a better sort of value than other monies or other assets. So those people ditch their other monies or their crappier stores of value and they put their wealth into Bitcoin. And its fiat denominated price or its value or its purchasing power goes up. Bitcoin, of course, produces no cash flow because it is cash and it produces no yield or payouts because it is money and money doesn't yield more money unless you perform some kind of shenanigans with it. But money can and Bitcoin does produce returns in the form of greater purchasing power. But if the returns come from anywhere, it's from that process of sucking the value out of other

10:25assets and other monies and into Bitcoin, which is a harder money. And Zimbabwe, you think they would take money off the table, right? Like the point is if you have the superior asset, it's going up forever, Laura, forever. I'm obviously glossing slightly over some of the other criticisms that people have of Bitcoin. But this video is strictly about the Ponzi scheme comparison. So again, a true Ponzi scheme requires a central operator, deceptive promises and returns, payments to old investors using new investors money. Bitcoin, of course, has none of those things. It's fully decentralized. There's no one in charge as a central operator. There are no promised returns. It's just open market price discovery. If someone promised you returns in Bitcoin, well, they're not the central operator of Bitcoin. So you probably shouldn't have listened to them. By the way, I also love how one of the biggest criticisms you'll always hear about Bitcoin is that it's too volatile. People say it's way too risky. While the other people are calling it a Ponzi scheme, maybe the same people calling it a Ponzi scheme. But a Ponzi scheme is literally defined as

11:26promising high returns with little to no risk. So how can it be both way too volatile and way too risky and a Ponzi scheme promising you high returns with no risk? Bitcoin, again, promises you nothing because there's no central operator. There's no CEO. There's no marketing team doing official Bitcoin messaging, making you promises. There's companies building on top of Bitcoin or doing things with Bitcoin that might be promising you things and you should be skeptical of all of them. But even if you think Bitcoin is promising you high returns, it is currently doing so only because it is also promising you tremendous volatility and risk. So it can't be both things. Ponzi schemes, by the way, also always collapse when they encounter a significant downturn. So if everyone tries to pull the money out, they'll then collapse is because the money is not actually there. Bitcoin has seen massive drawdowns throughout its history, 50, 70, 90%, but despite being declared dead in the media a million

12:26times, it's never actually died. It's never collapsed. So if it were a Ponzi scheme, how is that possible? Well, because it's not deceiving people with lies about money that isn't actually there, it's just a market like any other liquid, tradable asset or scarce desirable. Good. The price floor is put in by buyers in the free market. If sellers outnumber or overwhelm buyers at a given price level, then the price will drop. But Bitcoin has never fallen to zero because there's always demand for it. There's always buyers willing to step in at prices above zero. And it's not only never collapsed. It's always come back to make higher highs and higher lows than ever before. So it's a Ponzi scheme, but just one that can never actually collapse and always just keeps coming back and making higher highs. That doesn't quite track. Now to be fair again to the critics, Bitcoin shows like me do sound like Ponzi schemers because we will tell you Bitcoin is absolutely going to the moon and it is virtually risk free. But I am not the CEO of Bitcoin. So I won't be paying out your returns

13:29personally. But also me believing that or saying that is just a result of me studying and understanding the history of money, understanding the fundamental properties of Bitcoin, and simply extrapolating those two things out into the future. So I believe I guess that one of the biggest risks to Bitcoin is actually just that money and human beings stop behaving the way that they have for the last several thousand years. But I personally am not that worried about that. Ponzi schemes also, of course, require secrecy and deception. Bitcoin is literally just open source code, a fully transparent open ledger that anyone can see and audit and verify anytime they want. So again, where is the secrecy and the deception? Just because someone doesn't know how to read the code doesn't mean the code is lying. But I promised you earlier that once we had a little bit better understanding of Bitcoin and of Ponzi schemes, we would examine a real Ponzi scheme that's been hiding in plain sight for decades. The one that every person and every system completely depends on and that is, of course, Fiat money itself. The money we all use all day, every day, unless and

14:35until you opt out for Bitcoin. But the dollar, the euro, the yen, almost nobody ever questions these things, least of all the people calling Bitcoin a Ponzi scheme. Yet Fiat, of course, checks every single box of a Ponzi scheme. Let's walk back through it again. Fiat money is, of course, not backed by anything. It's literally created when the Fed types it into existence or by a bank when someone takes on new debt. So when the government borrows new money enters the system when banks issue loans, new money is created and issued in circulation. But a system built on debt only keeps working if new debt keeps being issued. It's a structure that requires constant new inflows to sustain itself. Does that sound familiar? The Fiat math does not work without new participants. The US government owes about $38 trillion today. But it doesn't pay the debt off. It just refinances it endlessly by issuing new debt to pay off or cover the interest payments on the old debt.

15:38It's literally a Ponzi formula. And just like every other Ponzi, it rewards those at the top. Banks and governments create the new money and they can spend it or benefit from it before prices adjust. And by the time it trickles down to you, of course, prices everywhere are rising. The new money literally redistributes existing wealth from all previous holders to those who receive access to the new money. I guess in that way, it's a little bit of a reverse inverse Ponzi because instead of paying out old investors with the money of new entrants, it's basically redistributing purchasing power from all the old investors to the receivers of the newly printed money. I don't know, maybe we'd call that an inverse Ponzi. But in this Fiat system, the money supply can never stop growing. It must inflate forever. If credit stops expanding, the defaults start cascading. And if the defaults cascade, the system collapses. So the only way to avoid that collapse is to print more and more money, create more debt, kick the cam further down the road. Meanwhile, the whole system is managed by a handful of unelected central bankers,

16:38meeting behind closed doors and deciding how much your money should be worth next year. They pull the levers in secret and you just live with the consequences. And they lie about things like CPI to under report inflation. So a Ponzi scheme requires secrecy and deception, and there you have it right there. And of course, a Ponzi always works until it doesn't. It survives as long as confidence holds and new participants keep it alive. Fiat money is exactly the same. It survives because people believe it will hold value tomorrow. I mean, I literally have people say to me all the time in the comments with a straight face that the dollar is backed by the full faith and credit of the US government. But look at the history and track record of Fiat monies. Almost all of them have eventually collapsed, just like Ponzi's games do. Because full faith and credit is not a recipe for real money. If the supply is effectively unlimited and the debt is effectively unpayable, then the purchasing power of the money is always decaying. At least the OG scheme or Charles Ponzi never pretended his scheme was a moral necessity.

17:39But we have governments and central banks who fully institutionalized this and then taught us that it's actually for the greater good of the economy. So of course, at the end of the day, the answer is no. The coin is obviously not a Ponzi scheme. But Fiat most definitely is. It's a system that only stays alive by promising the incumbents will remain solvent through the constant introduction of new money, a system that enriches the few, devalues the finite precious time of the many, and guarantees that they will dump on you in order to protect and enrich themselves forever. Bitcoin doesn't rely on debt, deception, or inflation. It's simply a globally open, permissionless, transparent, predictable and fair monetary system that anyone can freely opt into at any time. So of course, none of this is financial advice, but if I were to give you some life advice, it's to consider exiting the system designed to steal from you and consider putting more of your time and energy into a new system designed

18:42to protect your wealth and your property and make everyone play by the same rules. As always, if you want to learn to stack smarter and grow your conviction in Bitcoin, you subscribe to the channel, you hit the like button and leave a comment so the algorithm knows to send this video to all the Fiat Maxi NPCs who keep repeating Bitcoin is a Ponzi's game to each other all day long. And you never forget quit slacking and start stacking.