[gzer0]

> Where do these high APYs come from? Well a lot of it is coming from incentives of these protocols and speculation in those native assets. But the author doesn't even know that, so I won't bother steelmanning his argument

Is this not the very definition of a ponzi scheme? The returns coming from "incentives" of these protocols and "speculation" in those native assets sounds very ponzi-like to me.

[roywiggins]

If the yields are actually coming from speculation, it's not a Ponzi. Ponzis don't generate real yields, they just shuffle money from new investors to old investors. If it's actually making risky bets and winning them it's more like a hedge fund or something.

Of course hedge funds don't have steady 10% yields, they lose money when their risky bets don't pan out.

[adam_arthur]

That's essentially exactly what a Ponzi scheme is. You have an asset with 0 intrinsic value that only goes up in value due to new investors buying in.

You will only ever make more money if somebody buys in after you.

Unlike stocks where owning a share entitles you to profit stream of the company (intrinsic value)

[roywiggins]

If they are actually lending the money out to people who aren't investors, earning interest on it and returning that to investors, then Celcius is not a Ponzi scheme, it's probably speculating on weird, opaque and shitty assets, but it's not a Ponzi.

Like, if I set up a business "investing" in worthless penny stocks and somehow manage to generate returns, I'm not running a Ponzi. Maybe I'm pumping and dumping those penny stocks. It's still a scheme, it's just not a Ponzi- I am actually earning money for my investors! I'm defrauding other people, but I'm not defrauding my investors.

[adam_arthur]

Pump and dumping penny stocks works exactly like a Ponzi scheme. It's a layer removed perhaps, but the early buyers win and the later buyers lose, by definition.

I'm not an expert in Celsius, perhaps it's structured a bit differently. But any system that relies on new investors paying out the old is structured akin to a Ponzi scheme, if there's no intrinsic value element to the speculation.

If AAPL pays a 10% dividend, huge numbers of people would buy it for the yield. The yield comes from their underlying business, not from investor money. This puts a floor on the price.

When your yield only comes from newer investors, that's not intrinsic value or sustainable

[roywiggins]

Not every financial fraud is a Ponzi scheme, and it's silly to call everything a Ponzi. It sounds like Celsius probably is one, though.

[adam_arthur]

"A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors"

Explain how pump and dumping penny stocks doesn't apply? I agree that it's a bit different in nature than most Ponzi Schemes due to lack of central entity orchestrating it, but the net effect is the same in the end.

You get in early, you win, you get in late, you lose.

Even if we call it something else, it's clear the underlying mechanism and unsustainability of returns is the same.

[FanaHOVA]

Yields for nascent crypto projects are basically marketing budgets and user acquisition costs passed on to the user as profits instead of going to Google Ads or being a coupon for free fries with your order. They want to incentivize people to bring liquidity to them, and pay them for it. The real question is whether or not this actually leads to retention or of it's wasted capital, but that's beyond the point of the article.