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Comment by bronzeage | Hacker News Reader

It's not a Ponzi scheme because in ponzi scheme you deliberately use late investors money to pay early investors.

What happens in cryptocurrency is fake-exchange scheme. Tether is a fake currency printed in unlimited way by bitfinex which is also an exchange. By pretending tethers are real dollars you create the appearance of a stronger market for cryptocurrency than actually exists. It all rests on increasing the number of tether in circulation. It will fail when there is a run-on-the-bank on tether.

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The term you're looking for is "naturally occurring Ponzi scheme"

https://openknowledge.worldbank.org/handle/10986/19358

Very interesting paper.

Except that during crashes like this one, what you see is everyone moving their crypto holdings to stablecoins. The intent is to wait things out and then buy back in and profit during the next cycle.

They move to stable coins because most of those exchanges do not have dollar trading, rather you have to have a stablecoin as a middleman between fiat and crypto.

The move to stablecoins instead of cash is a reflection of major exchanges not being able to maintain banking relationships.

Also tax avoidance. My friend exchanged all his ETH to DAI at the top, doesn’t have to report that to IRS.

As someone else on here pointed out, the IRS would consider this selling ETH and buying an equivalent value in DAI. Selling the ETH is taxable as capital gains. Whether the IRS catches your friend or not is a different matter.

Point is, if you sell ETH for USD on Coinbase, they will report you to IRS.

But if you convert ETH to DAI, no one will get a report for that.

So trading pink seashells for grey seashells?

Sea shells have intrinsic value, cryptos don't.

What's the difference between:

* seashell (intrinsic value: $0.01, market value: $100.00)

* seashell token (intrinsic value: $0.00, market value: $99.99)

When no one wants to pay you anything for your seashells, you are stuck with the seashells.

I take seashells every time. You can’t decorate your hut with ethereum.

"Everyone" can't move from crypto. One person has to buy for another to sell.

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