Is Bitcoin a Pyramid Scheme?

We’ve been pretty vocal in our belief that cryptocurrencies are going to shape the future of finance. And a lot more than that.

But not everyone shares that belief.

Just this week the CEO of JP Morgan, Jamie Dimon, came out and said this in reference to bitcoin.

It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed’

I’ve seen some hyperbole in my time, but this takes the biscuit.

Now, Jamie Dimon has a big vested interest in the failure of bitcoin, as my colleague Sam Volkering explains here.

But we also get legitimate comments from readers asking the same thing.

Can You Even Buy a Car with Bitcoin?

For instance just this week we had a comment come through saying, ‘Bitcoin is a fraud. You can’t even buy a car with it?

Well I’m happy to correct the reader and state you can in fact buy a car with bitcoin!

And a very expensive car at that.

Check out this link after you finish.

In fact you can buy almost anything with bitcoin.

Have a look here as well.

In fact, the first use of bitcoin was to buy a pizza in 2010.

A bloke named Laszlo Hanyecz bought two pizzas for 10,000 bitcoin, a quantity of cryptocurrency that is now worth more than $48 million.

That’s an expensive pizza!

Are bitcoin and crypto a pyramid scheme?

The short answer is no.

But there is a ‘but’.

Crypto is an early stage technological revolution. As such, it comes with many risks. No one — and I mean no one — actually knows what the true value of all this will be.

That’s because it’s a work in progress.

It is not a static project. Cryptos like bitcoin are developing all the time. Sometimes there are major disagreements on how this happens. And as there is no central authority, these can get messy.

And as it is open source and decentralised, anyone can start their own cryptocurrency.

These new ones are created for different reasons.

Some are to fix perceived problems with bitcoin.

Some are to solve completely different problems, like Ethereum [ETH].

Some of the newer ones are very similar to shares.

And some — maybe a lot — are scams, pyramid schemes or ill-thought out projects that will fail.

Let’s be clear about the difference.

A risky project that might fail is not a scam or pyramid scheme. Even if it ultimately fails, bitcoin will have progressed the world of finance faster and further than they would have gone on their own.

It’s competition in action. And bitcoin is a viable competitor to the current financial system. Which is why people like Jamie Dimon are attacking it now.

The confusion for some people seems to be that bad people are in the industry.

That’s like saying money is bad because there are bank robbers. Or fraudulent accountants. Or irresponsible central bankers…

High Risk, Huge Potential

So in conclusion, no bitcoin and crypto are not a pyramid scheme. Their potential is truly huge. But it’s very risky.

I am a believer in this new system. Mainly because I see how corrupted the current financial system is becoming.

If you feel the same way, you need to start looking at this seriously.

But you will need a guide. We can help. Check out this for more information on this once in a life time opportunity.

Good investing,

Ryan Dinse,
Editor, Money Morning

Ryan Dinse is an Editor at Money Morning.

He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur.

With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle.

Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.

Ryan's premium publications include:

Money Morning Australia