Would that mean that the crypto exchanges run out of liquidity and it turns into a Ponzi scheme?
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There is a bit of a gap in reasoning here between people deciding to sell their bitcoin and why that would make Bitcoin a Ponzi scheme. It seems that either "Ponzi" is used as a more general term here than its commonly understood meaning, or the connection needs to be elaborated.– Murch ♦Apr 10, 2021 at 18:00
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1The main premise is similar to say QuadrigaCX, where there's some liquidity but not enough, so there's a backlog of unfinished Crypto to FIAT transactions. In Quadriga's case that was because there was straight up stealing or appropriations of funds/coins. But this was more of a hypothetical question on my end...– MarinApr 12, 2021 at 6:32
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So, do you mean to ask whether Bitcoin exchanges are run on fractional reserve? That's something else than a Ponzi.– Murch ♦Apr 12, 2021 at 14:19
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Correct.But it might lead to Ponzi , since it shares that element of risk of not being able to fulfill all orders at once.– MarinApr 13, 2021 at 7:18
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3 Answers
In order for you to sell your BTC for fiat cash, another trader needs to be on the other end of that deal and be willing to buy your BTC in exchange for their fiat cash.
So as long as someone is willing to buy your Bitcoin for cash, it'll have a dollar value. Now, if everyone only wanted to sell Bitcoin, and nobody wanted to buy it, it would be worth $0.
It probably means the price drops and eventually the exchange suspends trading of BTC.
Nit pick: BTC is cash. You can't convert cash into cash but you can exchange cash in one currency for cash in another currency.
answered Apr 2, 2021 at 9:24
you said everyone want to sell. but the real question is who will buy from them. no need everyone to sell. if most holder try to sell. the price will go down. but not absolutely. some guy will buy at a higher price. that absolute situation does not help determine the trend.
