Even before digital currency landed on the public's radar in 2013, people have been asking, "Is Bitcoin a Ponzi scheme?"
Many of Bitcoin's critics are convinced the answer is yes. Look at the comments section of almost any online story about Bitcoin and you'll see at least one self-appointed expert declaring Bitcoin a Ponzi scheme.
They're not alone, though. A fair number of financial pundits and bona fide financial experts periodically denounce the digital currency as a Ponzi scheme. Even institutions have chimed in.
Back in 2012, none other than the European Central Bank put out a study that called Bitcoin a Ponzi scheme. Since then, the ECB has only backed off a little. Earlier this year, a new report said Bitcoin is "inherently unstable" and ripped cryptocurrencies in general as "scamcoins."
The collapse of the Mt. Gox Bitcoin exchange in February 2014 had many announcing that not only was Bitcoin a Ponzi scheme, but that it was finished.
One of the harshest critics at that time was Bruce Richards, CEO of Marathon Asset Management, in an appearance on Bloomberg Television's "Market Makers" program.
"I think it's a Ponzi scheme, I think it's a fraud," Richards said. "I believe that Bitcoin will not have a legitimate place in history as a currency."
But while Bitcoin survived the Mt. Gox debacle and has continued to draw Wall Street interest and venture capital at an increasing rate, many remain unconvinced.
Like Washington Post reporter Matt O'Brien, who has written not one but two articles this year denouncing Bitcoin as a Ponzi scheme.
Making matters worse is that some bad actors have used Bitcoin to perpetrate real Ponzi schemes. In particular, Bitcoin cloud mining is overrun with fraudulent operators.
But there have been more conventional cases as well, such as New York-based Bitcoin Savings & Trust. In November, BS&T operator Tendon Shavers was arrested and charged with fraud for allegedly taking thousands of investors' bitcoins for himself, as well as paying off early investors with bitcoins from later investors.
And yet such activity is no different than Ponzi schemes and fraud committed using U.S. dollars. In other words, while Bitcoin can be used in a Ponzi scheme, the digital currency itself is not a Ponzi scheme.
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.