Steel man

Crypto assets are a form of predatory financial product. Asymmetric information within crypto markets privileges an economic cartel who can manipulate crypto assets to extract wealth from retail investors.

Evidence of claim being made

Livni, Ephrat. ‘As Crypto Tanks, Tech Veterans Question Blockchain’s Promise of Economic Salvation’. The New York Times, 15 June 2022, sec. Business. https://www.nytimes.com/2022/06/15/business/dealbook-dc-cryptocurrency-task-force.html.

Meyer, David. ‘“Extremely Risky” and “Inherently Predatory”: Wikipedia Organization Decides to Stop Accepting Crypto Donations’, 2 May 2022. https://finance.yahoo.com/news/extremely-risky-inherently-predatory-wikipedia-110040373.html.

White, Molly quoted in De Vynck, Gerrit. ‘First She Documented the Alt-Right. Now She’s Coming for Crypto.’ Washington Post. Accessed 21 September 2022. https://www.washingtonpost.com/technology/2022/05/29/molly-white-crypto/.

“Most of my disdain is reserved for the big players who are marketing this to a mainstream audience as though it’s an investment, often promising to be a ticket out of a really tough financial spot for people who don’t have many options,” White said. “It’s very predatory.”

Evaluation: True (high confidence)

Crypto asset market making is subject to extreme forms of market manipulation not found in other regulated markets. The price formation of crypto assets is untethered to any fundamental value and instead depends purely on the greater fool theory.

The price setting by crypto exchanges and order book design admits extreme forms of asymmetric information which privileges an economic cartel who can manipulate crypto assets to extract wealth from public from unfair market making.

The base economics of crypto assets make them negative sum which guarantees the amount of loses in the asset class exceed the gains.

Crypto assets are thus a form of predatory finance with negative expected-return much like gambling in a rigged casino.

References

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3. Corbet, Shaen. 2021. Understanding Cryptocurrency Fraud: The Challenges and Headwinds to Regulate Digital Currencies. Vol. 2. Walter de Gruyter GmbH & Co KG.
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10. Hamrick, JT, Farhang Rouhi, Arghya Mukherjee, Amir Feder, Neil Gandal, Tyler Moore, and Marie Vasek. 2018a. ‘An Examination of the Cryptocurrency Pump and Dump Ecosystem’. http://ssrn.com/paper=3303365.
11. ———. 2018b. ‘The Economics of Cryptocurrency Pump and Dump Schemes’.
12. Kamps, Josh, and Bennett Kleinberg. 2018. ‘To the Moon: Defining and Detecting Cryptocurrency Pump-and-Dumps’. Crime Science 7 (1): 18.
13. Li, Tao, Donghwa Shin, and Baolian Wang. 2019. ‘Cryptocurrency Pump-and-Dump Schemes’. Available at SSRN 3267041.
14. Xu, Jiahua, and Benjamin Livshits. 2019. ‘The Anatomy of a Cryptocurrency Pump-and-Dump Scheme’. In 28th USENIX Security Symposium, 1609–25.
15. Krugman, Paul. 2013. ‘Bitcoin Is Evil’. Paul Krugman Blog (blog). 28 December 2013. https://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil/.
16. ———. 2018a. ‘Bitcoin Is Basically a Ponzi Scheme’. The Seattle Times 30. ———. 2018b. ‘Transaction Costs and Tethers: Why I’m a Crypto Skeptic’. The New York Times 21.
17. ———. 2021a. ‘Technobabble, Libertarian Derp and Bitcoin’. The New York Times 21.
18. ———. 2021b. ‘The Brutal Truth About Bitcoin’. The New York Times 21.
19. Taleb, Nassim Nicholas. 2021. ‘Bitcoin, Currencies, and Fragility’. ArXiv:2106.14204 [Physics, q-Fin], July. http://arxiv.org/abs/2106.14204.