Clearly a comical currency conundrum
That do?
The US Commodity Futures Trading Commission (CFTC) is the latest financial watchdog to haul into court companies in the virtual currency space. On Friday, the CFTC, which oversees the derivatives markets in America, announced a pair of civil lawsuits against businesses it claims defrauded customers out of their hard-earned …
" had literally dozens of 'invest now' swisscoin scam/spam emails"
In much the same way that legitimate pharmaceutical suppliers rarely resort to spam or untargeted ads, any ICO being pumped the same way usually stinks to high heaven.
I'm yet to see any actual ICO result in any real world product. There seem to be a lot of promises made by people who don't have the technical nous to even make their own coin, so they have to piggy-back on an existing one.
And all the “we’re launching a new currency to buy x” ICOs:
Do we really want a whole load of different currencies to buy different things rather than a £, €, $ or whatever that can be used to buy everything?
At least with the dot.com bubble, the concept was fine even if the individual business plans were not, and the valuations were way off.
Ponzi schemes are specific form of scams.
Generally things like pensions or social security are not considered to be a Ponzi, despite the fact that there are more liabilities than assets and they only survive by a flow of new money and increasing their future liabilities.
Even things like commodity markets which are 90%+ paper* are not considered Ponzi schemes, despite the potential similarities. Because you can, in theory, convert your paper gold/beef to a real one.
Just because something is a speculative investment does not inherently make it a Ponzi.
In general it's only a Ponzi scheme if it follows this pattern:
1. Investors are promised returns based on the company doing x with their capital
2. The money invested is *not* used for x
3. As there are no actual returns from x, any payouts come from the invested capital
If at stage 2 the money is invested in x, and then all the money is lost, then it's not a Ponzi. It's just a failed investment.
I for one am glad that the SEC et al are treating crypto as an asset, and ICOs getting the proper amount of scrutiny that anyone asking for investment from the public should do.
Also kudos to the reg for finding an actual Bitcoin Ponzi, as compared to a normal Ponzi which used Bitcoin as it's "we're investing in x".
* for every steer sold, there are about twenty beef futures. For every physical ounce of gold traded, about sixty ounces of paper gold are traded, and so on
When you buy a beef future, it is matched by someone selling a beef future to a bank. This could be a farmer who wants to guarantee a price for a baby calf that’s on the farm, a perfectly legitimate hedging strategy, or someone who wants to place a bet on the movement of beef prices.
I guess while Crypto Currencies are similar to a Ponzi scheme, they are specifically different in that they are looking to replace cash/trading value. Not as an investment scheme themselves. Just many are using it as a Ponzi/tulip/bull market type investment currently.
Cryptocurrencies themselves are not Ponzi schemes as their value fluctuates with the market though as an investment I would class them tulip bulbs. The problem is there many schemes that claim to invest in cryptos with guaranteed rate of return (one characteristic of the classic Ponzi scheme) but there is no way they can actually guarantee future returns. These schemes rely on the 'investors' vague knowledge of cyptos and how they work but awareness of them.
What Charles Ponzi's scheme was to make a plausible sounding line about buying a real financial instrument and using arbitrage to make money (he guaranteed a specific rate). But instead of investing in the actual instrument, use new money to payoff previous 'investors'. The classic Ponzi scheme eventually falls apart because there are a finite number of potential investors. One of the 'insights' Ponzi had was to reason a real financial instrument that people would be aware of but vaguely understood how it worked. It worked in the 1920's and similar scheme work today.
The only difference then is whether you can get out before the collapse. Anyone who was in a Ponzi scheme early on and somehow escaped/made lots of money before it imploded will have every reason to congratulate themselves ( excluding the originators, it they are behind bars,of course).
This could be a farmer who wants to guarantee a price for a baby calf that’s on the farm, a perfectly legitimate hedging strategy
Although he then takes on the risk that if his calf doesn't survive, instead of simply not getting income from the cow, he's also lumbered with having to buy himself out of a futures contract. Effectively it's a big bet against foot & mouth, so he needs to take out additional insurance against that.
Probably better to leave farming altogether and move into finance or insurance. He'd get more money for less work anyway...
He always needs insurance against the loss from his calf dying (or he takes the risk himself). The hedging contract gives him insurance against changes in market prices, nothing else. If he hedged the risk with an option, he can walk away from it at no cost. If he took out a futures contract, then with no calf to sell he becomes a speculator: he pays out for the difference between the contracted price and the market price at the intended delivery date (and if that is in his favour he wins money back).