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Why an American Think Tank Brands Bitcoin ‘a Scam’

bitcoin ponzi scheme
A think-tank called Gravel Institute believes that Bitcoin is a scam. Credit: Onov3065/Wikimedia Commons/CC BY-SA 4.0

An American think-tank called the Gravel Institute recently released a new video explaining why it believes Bitcoin is a scam akin to a Ponzi scheme.

Writer and economist Doug Henwood spoke in the video explaining why he believed Bitcoin resembled the structure of a Ponzi scheme and other historical scams.

Henwood quickly outlines the format of Ponzi schemes, where criminals take money from their victims and promise to invest that money, while actually cycling it back to earlier investors. Henwood said what was key to note about the relationship between Ponzi schemes and Bitcoin was that Ponzi schemes tend to fail because they run out of money to move between investors — something he compared to Bitcoin’s limited supply of tokens, capped at 21,000,000.

Henwood also highlighted the fact that bitcoin is not backed by anything at all, and it is infrequently used as actual currency as crucial parts of his argument.

The economist said that once bitcoin began to really accrue value after 2017, the token became almost entirely speculative — people’s interest in buying bitcoins was in holding them in the hopes that their value would increase: “Why use bitcoin as currency when it might be worth more money later?” was the logic Henwood espoused.

Gravel Institute video outlines why they think Bitcoin “is a scam”

But he claims that this dynamic has a dark side. If bitcoin is purely speculative, and only backed by the blockchain’s ability to guarantee electronic transactions, people are simply buying bitcoin waiting for more people to follow them and buy as well — driving the value up and providing them a return on this investment. This is where Henwood’s comparison between bitcoin and Ponzi schemes becomes salient.

Henwood had written extensively about his position on cryptocurrency before appearing in this video for the Gravel Institute. In a previously published essay, he wrote that even though Bitcoin “fails as money,” it had “acquired a vivid life as a speculative asset. But unlike more conventional speculative assets, its value is completely immaterial.

“Stocks are ultimately claims on corporate profits, and bonds are a claim on a future stream of interest payments. You can say no such thing for bitcoin. Its only value is what someone else will pay for it later today or maybe tomorrow. And now they’re trading futures on it, which takes speculation into a fourth or fifth dimension.”

Henwood also notes that the way novelty and branding — a hallmark of Dogecoin and other Elon Musk-supported tokens — affects a coin’s value is a major red flag: “And what a speculative mania it is. Everyone wants to be part of the action.

“Bitcoin imitators are sprouting daily. The other day, speculators forked over $700 million to a company,, for a cryptocurrency that doesn’t really exist and, according to its sponsors, has no purpose.

“The company has disclosed almost no information about itself, and almost nothing is known about its founders. And early on Thursday morning, the Long Island Ice Tea Corp., which sells nonalcoholic beverages, changed its name to Long Blockchain, and its stock price promptly more than doubled. The firm has no agreements with any cryptocurrency promoters, nor does it have prospects for any. The mere name change did the trick.”

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