Is Cryptocurrency a Pyramid Scheme?
Crypto Knowledge

Is Cryptocurrency a Pyramid Scheme?

written by John Murphy | December 29, 2022

Everybody likes to make money quickly in a world full of financial setbacks. It has brought to life scams and frauds who take advantage of unsuspecting people. Since cryptocurrency, too, is a relatively new concept in the market; thus people question – is cryptocurrency a pyramid scheme.

Pyramid schemes are the ones that scam people into investing money with minimum to no return. Since cryptocurrency has had its setbacks quite regularly, leaving investors with none in their accounts; thus word about it being a pyramid scheme is circulating in the market.

So, just because it is risky does not necessarily mean it is a pyramid scheme. Despite being a high-risk investment, it has traits that do not chime with a pyramid scheme.

Let us now dig out the core of cryptocurrency and understand whether it is like a pyramid or a Ponzi scheme.

The Pyramid Schemes

A pyramid scheme is a business scheme that hires members by promising them rewards for enrolling others. You can easily find such methods running all over the world. 

However, some specific platforms use crypto in their schemes, which is different from the reality of the coin or the technology behind it. Most of the time, the first adopters of technology are criminals, be it phones, guns, shoes, or any other helpful instrument. 

But cryptocurrency is not a pyramid scheme. Be wary of people who tip cryptos as a pyramid or Ponzi-type scheme. After all, the US dollar is not a pyramid.

Similarities between Pyramid Schemes and Cryptocurrency

Since the word is already out, let us try to reason why the cryptocurrency is linking with pyramid schemes. There are a few similarities between the two, and they become a possible cause of the resemblance.

Here are a few similarities between cryptocurrency and pyramid schemes.

  • High Returns

Many cryptocurrencies, including Bitcoin and Ethereum, have generated high returns. Interestingly, many investors think there is little or no risk involved in crypto investment. 

Somehow, they are not wrong, as you’d be up by 700% by now had you invested in Bitcoin five years ago, despite recent crashes. So, high returns in a short period are a distinguishing factor of a pyramid scheme.

  • Overly consistent returns

By pledging coins to a blockchain, crypto investors are assured of an inevitable return. It is a feature common in pyramid schemes as well. Therefore, people believe that cryptocurrency is a pyramid-related scheme.

  • Unregulated investment

Just like pyramid schemes, cryptocurrency is largely unregulated and not regulated by governments worldwide. Furthermore, many countries ban crypto trading in their territory.

  • Unlicensed sellers

Eerily, many crypto exchanges around the world are not licensed. Similar is the case with pyramid schemes. However, this is changing in recent times, but still, many unregistered sellers are trading in the cryptocurrency world.

  • High risk

The Crypto market is precarious; it is crystal clear that the risk level to evaluate cryptocurrency is as high as mount Everest, similar to pyramid schemes. It works as a jackpot; if it hits, you can be a millionaire overnight.

Cryptocurrency – A Chartered Territory

All of the above similarities suggest that cryptocurrency is a pyramid scheme. However, this is not the case; the crypto market is very well-regulated and has attracted well-established global companies to put their stakes in heavy investments.

Similarly, the crypto world is backed by top celebrities and has started to gain acceptance among governments. Therefore, comparing cryptocurrency with a scamming scheme like the pyramid is unfair. 

Thus, cryptocurrency is a chartered territory that has started making its mark in the financial system.

Here are key features of cryptocurrency that put them outside pyramid schemes’ shadows and make them a proper industry that requires a well-thought-out process to get returns.

  • An investment

Cryptocurrency is a sound investment rather than a means of investment. People who invest in cryptocurrency have to make an educated guess as there are equal chances of loss. In pyramid schemes, you need to bring in new people without worrying about investment loss.

  • Means of payment

Cryptocurrency carries value, meaning you can use it to buy products or services just like fiat currency. However, this is not possible with any other scamming scheme.

  • Store value

Further, cryptocurrency stores value; evaluation systems determine each crypto’scrypto’s value at a specific time.

  • Global Acceptance

With the increased trust of investors, cryptocurrency is now a global phenomenon. Many countries have already started formulating regulations for their trade.

  • Independent portfolio

Unlike a pyramid scheme, each investor has an investment portfolio independent of other investors. There is no chain effect as far as crypto is concerned. In a pyramid scheme, people have to bring in new users to qualify for a return.

Frequently Asked Questions

Is Cryptocurrency a Pyramid Scheme?

Cryptocurrency is not a pyramid scheme as it is a regulated, highly invested, and globally accepted marketplace where reputed organizations have investment stakes.

Is crypto a quick-rich scheme?

Crypto is not a quick rich scheme; if someone tries to sell you using this mantra, it is a scam or fraud, so stay away from such emails or messages.

Is cryptocurrency used for scamming?

There are chances that scammers may use cryptocurrency since it has become a billion-dollar industry. Therefore, scammers often try to cheat people using cryptocurrency.

Can crypto be trusted?

Despite its decentralized nature, transactions done through cryptocurrency are very secure and recorded on blockchain networks.

Parting Thoughts

With the increased market capitalization of cryptocurrencies, many scammers have surfaced, trying to cheat people. Therefore many potential investors have barred themselves from entering the crypto market and ask is cryptocurrency a pyramid scheme.

However, cryptocurrency is not any pyramid scheme. Many governments have already started accepting cryptos as a similar means of the financial system. Cryptocurrency is challenging conventional economic systems, and many experts say it is the future of finance.

Furthermore, despite recent setbacks, cryptocurrency has recovered itself well, so it is here to stay. Unlike pyramid schemes which are scamming platforms, crypto is trusted by millions and has established itself as a billion-dollar industry.

So, just like any other sane person, cryptocurrency is not a scamming platform. You can trust it like millions of others from around the world.

Please leave feedback in the comments section and let us know what you think about whether cryptocurrency is a pyramid scheme or not.