Is crypto a Ponzi scheme?

ASX AMP Capital cryptocurrency crypto bitcoin

19 November 2021
| By Laura Dew |
image
image
expand image

Cryptocurrency has elements of a Ponzi scheme, according to AMP’s Shane Oliver, and is creating a speculative mania among investors.

Speaking to Money Management, Oliver, chief economist at AMP Capital, said Bitcoin and other cryptocurrencies lacked fundamental value and relied on other people’s speculation to keep rising.

“It doesn’t generate any income or any dividend, I am sceptical about that. It is a global phenomenon but lacks any fundamental value and that’s where the risk lies,” Oliver said.

“In some ways, it’s a Ponzi scheme because it relies on other people buying it, most of it is speculation and it does not provide a service which are elements of it being a Ponzi scheme.

“People also get very evangelical about it which concerns me as they are probably the ones who got in early but not everyone is in that category.”

He said that if people wanted to invest, they needed to be wary and aware it could see big falls in price, in 2017 the price of Bitcoin fell by 80% and lost half its value in two days. However, at that time, the asset was only narrowly held so fewer people were affected by the fall.

“People need to have their eyes open and recognise it is a punt and that they could lose their money, just because it’s gone up doesn’t mean it can’t fall back again,” Oliver said.

“If [an 80% crash] happened now then people could lose a fortune and that would definitely be a prompt for regulators to impose tougher regulation.”

In the past 12 months, the price of Bitcoin had risen 236% while Ethereum had risen 765% over the same period.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

This verdict highlights something deeply wrong and rotten at the heart of the FSCP. We are witnessing a heavy-handed, op...

2 days 7 hours ago

Interesting. Would be good to know the details of the StrategyOne deal....

6 days 13 hours ago

It’s astonishing to see the FAAA now pushing for more advisers by courting "career changers" and international recruits,...

3 weeks 4 days ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

2 weeks 6 days ago

A former Brisbane financial adviser has been charged with 26 counts of dishonest conduct regarding a failure to disclose he would receive substantial commission payments ...

5 days 11 hours ago

Pinnacle Investment Management has announced it will acquire strategic interests in two international fund managers for $142 million....

4 days 14 hours ago