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Is Cryptocurrency a Ponzi Scheme? – Big Twist

Cryptocurrency and ponzi schemes look similar in a lot of ways. Both the sectors experience violent swings and for the participants, it certainly is an adrenaline filled ride. With new products coming out, you need to be very careful while looking for your next big investment.

More importantly, you should know the ways of distinguishing between a genuine project and a cash grab. Also, invest in things you understand and never try to make quick gains. Of course, hearing an overnight millionaire’s story is inspiring, but do not let it make you reckless.

Skill is needed to earn enormous returns and maintaining an edge is all about taking pre-calculated risks. To be on the safer side, take advice from financial planners and do not let emotions get in the way.

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    Ponzi schemes are always disguised in a clever manner. Nonetheless, it never ends well. Continue reading to know more about this deadly trend.

    Is Cryptocurrency a Ponzi Scheme? - Big Twist

    Bit of Background

    Investors and traders are fascinated with the idea of creating passive income sources that deliver consistent returns. Sadly, there is no such thing as a sure shot in the markets and anyone that says otherwise is likely to be a con-artist. From the early 2000’s, the financial sector has changed a lot.

    Unfortunately, the government was never quite successful at eradicating scams from this space. High returns and exaggerated claims have always enticed the public, but as expected apart from the scammers, no one has ever earned money from it.

    So, next time you encounter any opportunity that is simply too good to be true, think twice before risking your funds. After all, you cannot automate every aspect of financial markets, right?

    Cryptocurrency and Regulation

    Cryptocurrency is a nightmare for the regulators and government. Decentralized network certainly has a lot of uses, but at the same time, it creates few problems as well. Due to the rapid growth of this niche in particular, a lot of scam projects are hitting the markets frequently.

    The demand is sky high and regulatory bodies are simply not able to keep up with it. Though the regulators are doing their best to keep retail investors safe, the equation is still heavily skewed.

    Presently, there are few regulated options around, but for the most part the sector isn’t as mature as their counterparts. In other words, as retail investors, it is our duty to be careful and doing thorough research is our responsibility. 

    Ponzi Scheme

    Ponzi Scheme is a kind of mlm type program wherein the cash flow is created by using the capital of the new investor to pay out the old one. From the inception, it is easy to figure out that this kind of business will inevitably collapse.

    Many Ponzi Schemes have lasted for a considerable period of time. However, as soon as the marketing efforts dry up, they will have to bite the dust and there is no way around it. For all the right reasons, this kind of business is banned in almost all developed countries.

    Learn to assess cash flow before investing into anything. For any reason, if you cannot trace the revenue model or if the underlying firm is not transparent, then it is better to walk away from the situation. 

    Greater Fool Theory and Ponzi schemes

    Some products appreciate in value purely because of the hype around it. Greater fool theory is a simple to grasp concept. Whenever a person buys something that has no intrinsic value and is hoping for the next buyer to pay a higher price, then the situation is categorized under greater fool theory.

    The theory mentioned above can also be termed as a bubble and in the past, many assets fall under this scenario. On the other hand, ponzi schemes are notorious. Greater fool theory is at least textbook legal, but ponzi schemes are way too nasty and they are not something you should get involved with.

    Any business that does not have a steady cash flow will fail and this one is no exception. Whenever you hear about a new investing opportunity, go through the books of the firm and check their legality. If a firm is shying away from the public eye while boasting about the milestones they have touched, it is certainly a risky affair. 

    General Advice

    Making money from the markets is definitely possible. However, it does take a lot of time to find an edge and one has to be constantly adapting to the changes. If you are serious about investing, then get yourself educated.

    More importantly, talk with a licensed financial adviser and take their input on the best ways to invest your money. Remember, no one can tell you the next big thing and risk will be ever present. However, if you learn to manage risk effectively and start leveraging different instruments, the odds will be in your favor. 

    Ponzi Scheme Bottom Line

    P​​onzi schemes are way too common nowadays and the blockchain buzz has even enhanced this trend. Today, there are more bogus schemes than ever before and if you don’t do proper research, chances are you will get burnt both financially and emotionally.

    If you ever fall victim to a ponzi scheme, do not lose hope instead act quickly. Start the fund recovery process by contacting our team via the form below. Our staff will give you an actionable blueprint for free and assist you with all related matters. 

    Do you think cryptocurrencies are nothing more than a ponzi scheme? Comment your views below.

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