Yesterday I posted a thread on why Bitcoin's upside is limited (greater fool asset, energy consumption). I want to expand on the greater fool aspect, and the comparison I made to MLM schemes /1
Market saturation is the point at which all the people who want the product at the desired selling price will purchase. No product or service will achieve 100% market penetration, since not everyone will want the product or be able to afford it.… /2
Even the most successful product will only achieve partial market penetration. Once the market is saturated, no one else will buy the product unless the price is lowered. /3
And even if the price is lowered, you'll still only have partial penetration due to a variety of other factors /4
MLMs ignore market saturation because they are built on recruiting more and more distributors in a downline. But if the market is saturated (which it always is), all those distributors are set up for failure because they will be unable to sell any product /5
Unlike non-MLM companies, which can adjust supply in relation to demand when the market is saturated, MLM's don't have the ability to make such adjustments. /6
Bitcoin and other cryptos can be viewed in a similar light. They are completely dependent on recruiting new investors since there is only one source of money inflows /7
However, the supply of greater fools is not infinite. Also, there are a large number of people who will never buy it for a variety of reasons. The climbing price alone guarantees that /8
The more expensive it gets, the less people are able to afford to put money into it. And since it's a zero-sum game (negative sum if you factor in miners), the people buying in later (or the early investors who never sell) are guaranteed to lose money /9
Ultimately, you reach a sort of "market saturation" just like a MLM. "Number go up" stops, and the only direction left is down as early investors decide to take profits, leaving later investors holding the bag /end
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12 Dec
In a recent excellent thread by @coloradotravis on how crypto is the financialization of belief, I saw people respond with claiming Bitcoin has "unlimited upside." This isn't true. The upside is very limited, giving Bitcoin a very poor risk/reward profile. A thread /1
@coloradotravis First, Bitcoin is purely a greater fool asset. While it may not technically be a ponzi, it has the same structure in that it is 100% dependent on inflows of new investor money to pay out early investors. Unlike the stock market, there are no other sources of inflows /2
The problem with any pure greater fool asset is that you eventually run out of fools who are willing to buy at higher prices. This alone caps the upside 3/
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