On the mysterious world of cryptocurrency, trader Sam Bankman-Fried, and a related, alarming executive edict from Trump about a world he doesn't understand
Cryptocurrency may be the greatest scam ever (in competition for first place with Trump's election). It is expensive to produce and is backed by no assets, but by the faith that someone stupider than you will buy it when you want to cash out. Trump's proposal (at the behest of the tech bros) for a cryptocurrency reserve takes the scam to a whole new level. As the treasury buys more crypto every year, it will elevate the price...until the investors decide to cash out which, like a run on a bank, would leave a huge hole in the budget.
When the mortgage crisis hit in 2008, something like $3 trillion in wealth evaporated overnight, but at least there were actual assets -- houses -- to mitigate the losses. When crypto goes bust, the treasury will be left with an empty bag. Scratch that; there won't even be a bag.
I've had a couple of people all dewy-eyed about crypto argue to me that crypto is no less credible than fiat currency because the latter is based on nothing more than faith that the issuing government will continue to exist and manage the money supply at least somewhat responsibly.
While it's true that dollars, or euros or any other major currency you prefer, aren't based on a tangible asset like gold, the argument fails in a couple of important ways. First, fiat money is necessarily centralized and regulated: administered and regulated by a central bank or governmental authority (again, sometimes effectively, sometimes not so much). Crypto by its nature is atomized or decentralized, any number of products across any number of exchanges and with no oversight or controls to minimize the "greater fool" problem and prevent wild volatility. Another is that fiat money is universally accepted, within its home country if not globally; crypto has a very limited audience and reach. Try paying for your groceries or paying your credit card bill with 0.0003 bitcoin, or dogecoin, or whatever. (For present purposes I'm leaving out the question of Cuba, which has parallel economies.)
Matt Tait, quoted at the end of Asha's article, is exactly right. What's going on now is a scam on an enormous scale, designed to leave the government holding the bag full of nothing more than electrons in a computer system somewhere while the scammers run away with all the actual money.
In crypto, Trump has found his perfect scam. He doesn't even have to contract with China to make a pair of gold sneakers or sell Bibles. He can sell "nothing" to the world, and when he is ready he can cash out and all the buyers will be losers. Meanwhile, foreign governments and other gangsters can pour money into Trump's crypto scheme, and not be traced. If Trump gets the government to back his crypto the country will go bankrupt just like Trump's casinos.
Finally, the banking system can be significantly impacted if the crypto market goes south.
This is the crux of the issue! You need to elaborate on it more. All those mountains of fake money are crying to be made legitimate …. I surmise there will be schemes to make this happen
You make me laugh. At 67 I’m pretty sure my financial plan will outlast me (hopefully, although the orange Mussolini kind of makes me think twice). I am so lucky and grateful and hope I can continue to share long after I am dead. I guarantee, bitcoin, doggy or any other fake currency will NOT be a part of it. I kind of proclaim that life no longer owes me anything. As I look at the next hour, day, year, decade, etc, I do wince and hope I have organized appropriately (I know I have not, too many books on my shelves still to be read). I just pray I will see us on the democracy tract again before I die. This is so sad but I am forever hopeful. Do not despair, I don’t.
Very informative post, Asha! We all need to keep pushing back against this ponzi scheme, especially as it relates to involvement in our banking systems. Never forget - Trump has destroyed many businesses. He's a get rich quick kind of guy and his schemes only exist to enrich himself.
A good engineering model for Crypto assets is the tankless water heater. It has no storage of energy. When somebody wants to take a warm shower the heat needs to be created at the same time. A water heater with a tank can store energy. People who buy coins provide warm showers to the previous owner of the coin. When they want to take a warm shower in the future they can only hope to find the fool who warms their water.
Start to think about a traditional water heater that has a tank that stores hot water. We can have a solar collector that heats the water in the tank and then take a hot shower at night from the stored water. So as a system there is a STORAGE element. In the tankless water heater there is no storage. Heat must be provided to warm the water as it flows through. Maybe the video below at time 17:25 can help you understand the lack of storage in the Coin system: https://www.youtube.com/watch?v=pttqO3ROVUo
Thanks for this, Asha. I’ve never understood cryptocurrencies, either, and I have an undergraduate degree in economics. My sense is that it’s all about fleecing the rubes. BTW, your personal voice really shines through in this piece! :-)
At last, I get it. I always felt crypto was like Monopoly money, but wondered whether I was missing THE thing that gave it legitimacy. HAH!! Finally someone explains it clearly enough for me to understand. Thank you, Asha!
Here we are witnessing the children classic story in real life, with arrogant D.Trump “The Emperors New Clothes”. Let’s not join the crowd of fools. Thank you for your post.
I still would still fail a quiz on crypto currency but I do know if Trump is involved it’s him ripping off the uneducated and uninformed. Basically his target group in business or politics.
DJT might be laughing but he is surely an old man and soon he will be dead. None of his crap will do him any good then. His hamburgerlar hat wife and moron kids, grandkids will be evil spawn of a dead monster they never gave a shit about anyway. They all look like the saddest, despondent people ever seen. Hopefully he will rot before he takes his last putrid breath.
From tulips in 15th century to dotcoms in 1990s and now to 21st century crypto, get rich
quick schemes have flourished. But I remember one that may seem a little benign but became its own “investment vehicle” for a while: Beanie Babies.
Remember those little stuffed animals with sweet names and charming backstories? Parents, and eventually collectors, waited impatiently for the newest release, bought for either a Christmas stocking or a bank vault. Meant as a child’s toy, “investors” purchased and stored them with the original tags, never to be sullied by a nursery floor or a 5 year old’s grubby hands, waiting for their inherent value to increase exponentially. One father famously invested his sons’ college fund in the purchase of the critters, planning to have enough left after higher education for his retirement. After the hype of Beanie Babies began to wane, this dad was, infamously, left with a spare bedroom filled with worthless floppy limbed animal dolls with perky names.
Nobody laughed all the way to the bank with Beanies in hand except perhaps Ty Warner, owner of Ty, Inc, the creator of Beanies Babies. But, fate has a way of intervening. Warner was convicted of tax evasion in 2014 and sentenced to probation and community service.
Asha’s article got me thinking that, in addition to crypto, of all the other ways that Donald Trump‘s recent edicts could blow up in his face at any time. For one, his crippling of the science based public health agencies — when there is a severe concern that bird flu may set off another human pandemic — will leave us without the resources to fight and defeat another global scourge. When consumers discover that once again, prices are spiraling up at the checkout line due to tariffs on everything from imported produce to children’s clothes, who are they going to hold accountable after those pledges to reduce prices evaporate? Six months to a year from now, how will the combined effects of Trump‘s misbegotten executive orders will manage to make every American family feel the worse in one way or another?
Something is bound to happen. At present, we lack the foresight to know when and where and how severe the public reaction will be.
Cryptocurrency may be the greatest scam ever (in competition for first place with Trump's election). It is expensive to produce and is backed by no assets, but by the faith that someone stupider than you will buy it when you want to cash out. Trump's proposal (at the behest of the tech bros) for a cryptocurrency reserve takes the scam to a whole new level. As the treasury buys more crypto every year, it will elevate the price...until the investors decide to cash out which, like a run on a bank, would leave a huge hole in the budget.
When the mortgage crisis hit in 2008, something like $3 trillion in wealth evaporated overnight, but at least there were actual assets -- houses -- to mitigate the losses. When crypto goes bust, the treasury will be left with an empty bag. Scratch that; there won't even be a bag.
I've had a couple of people all dewy-eyed about crypto argue to me that crypto is no less credible than fiat currency because the latter is based on nothing more than faith that the issuing government will continue to exist and manage the money supply at least somewhat responsibly.
While it's true that dollars, or euros or any other major currency you prefer, aren't based on a tangible asset like gold, the argument fails in a couple of important ways. First, fiat money is necessarily centralized and regulated: administered and regulated by a central bank or governmental authority (again, sometimes effectively, sometimes not so much). Crypto by its nature is atomized or decentralized, any number of products across any number of exchanges and with no oversight or controls to minimize the "greater fool" problem and prevent wild volatility. Another is that fiat money is universally accepted, within its home country if not globally; crypto has a very limited audience and reach. Try paying for your groceries or paying your credit card bill with 0.0003 bitcoin, or dogecoin, or whatever. (For present purposes I'm leaving out the question of Cuba, which has parallel economies.)
Matt Tait, quoted at the end of Asha's article, is exactly right. What's going on now is a scam on an enormous scale, designed to leave the government holding the bag full of nothing more than electrons in a computer system somewhere while the scammers run away with all the actual money.
We’re looking more and more like Putin’s Russia with each passing day.
In crypto, Trump has found his perfect scam. He doesn't even have to contract with China to make a pair of gold sneakers or sell Bibles. He can sell "nothing" to the world, and when he is ready he can cash out and all the buyers will be losers. Meanwhile, foreign governments and other gangsters can pour money into Trump's crypto scheme, and not be traced. If Trump gets the government to back his crypto the country will go bankrupt just like Trump's casinos.
This is the most I’ve ever understood about crypto. Thank you!
Finally, the banking system can be significantly impacted if the crypto market goes south.
This is the crux of the issue! You need to elaborate on it more. All those mountains of fake money are crying to be made legitimate …. I surmise there will be schemes to make this happen
"Schemes" never make anything legitimate!
https://www.forbes.com/sites/edanyago/2025/01/28/the-us-government-will-certainly-buy-bitcoin-heres-why/
Hit pieces like this supporting legitimacy are worrisome!
You make me laugh. At 67 I’m pretty sure my financial plan will outlast me (hopefully, although the orange Mussolini kind of makes me think twice). I am so lucky and grateful and hope I can continue to share long after I am dead. I guarantee, bitcoin, doggy or any other fake currency will NOT be a part of it. I kind of proclaim that life no longer owes me anything. As I look at the next hour, day, year, decade, etc, I do wince and hope I have organized appropriately (I know I have not, too many books on my shelves still to be read). I just pray I will see us on the democracy tract again before I die. This is so sad but I am forever hopeful. Do not despair, I don’t.
You should read the poem, "Breathing Under Water" by Carol Bialock
Very informative post, Asha! We all need to keep pushing back against this ponzi scheme, especially as it relates to involvement in our banking systems. Never forget - Trump has destroyed many businesses. He's a get rich quick kind of guy and his schemes only exist to enrich himself.
A good engineering model for Crypto assets is the tankless water heater. It has no storage of energy. When somebody wants to take a warm shower the heat needs to be created at the same time. A water heater with a tank can store energy. People who buy coins provide warm showers to the previous owner of the coin. When they want to take a warm shower in the future they can only hope to find the fool who warms their water.
I love this analogy
Shit, I'm so lost, I don't even understand the analogy.
Start to think about a traditional water heater that has a tank that stores hot water. We can have a solar collector that heats the water in the tank and then take a hot shower at night from the stored water. So as a system there is a STORAGE element. In the tankless water heater there is no storage. Heat must be provided to warm the water as it flows through. Maybe the video below at time 17:25 can help you understand the lack of storage in the Coin system: https://www.youtube.com/watch?v=pttqO3ROVUo
Christian,
Oh my god, you're so kind, thank you for sending that! Not only did I watch the clip (very helpful), but I intend to watch your entire video.
Just an aside, I didn't even know that tankless heaters existed. Never had one and never knew it was even an option.
Many thanks!
Thanks for the explanation. I may retain my comprehension for 5 minutes this time.
One aspect of this is that it is a way for individuals or countries or businesses to give him untraceable bribes.
I see no one reporting on this.
Thanks for this, Asha. I’ve never understood cryptocurrencies, either, and I have an undergraduate degree in economics. My sense is that it’s all about fleecing the rubes. BTW, your personal voice really shines through in this piece! :-)
At last, I get it. I always felt crypto was like Monopoly money, but wondered whether I was missing THE thing that gave it legitimacy. HAH!! Finally someone explains it clearly enough for me to understand. Thank you, Asha!
At least Monopoly money is real paper.
Most excellent piece. I think the CBDC was a good idea and *surprise* the POSOTUS ordered it banned.
Here we are witnessing the children classic story in real life, with arrogant D.Trump “The Emperors New Clothes”. Let’s not join the crowd of fools. Thank you for your post.
I still would still fail a quiz on crypto currency but I do know if Trump is involved it’s him ripping off the uneducated and uninformed. Basically his target group in business or politics.
DJT might be laughing but he is surely an old man and soon he will be dead. None of his crap will do him any good then. His hamburgerlar hat wife and moron kids, grandkids will be evil spawn of a dead monster they never gave a shit about anyway. They all look like the saddest, despondent people ever seen. Hopefully he will rot before he takes his last putrid breath.
From tulips in 15th century to dotcoms in 1990s and now to 21st century crypto, get rich
quick schemes have flourished. But I remember one that may seem a little benign but became its own “investment vehicle” for a while: Beanie Babies.
Remember those little stuffed animals with sweet names and charming backstories? Parents, and eventually collectors, waited impatiently for the newest release, bought for either a Christmas stocking or a bank vault. Meant as a child’s toy, “investors” purchased and stored them with the original tags, never to be sullied by a nursery floor or a 5 year old’s grubby hands, waiting for their inherent value to increase exponentially. One father famously invested his sons’ college fund in the purchase of the critters, planning to have enough left after higher education for his retirement. After the hype of Beanie Babies began to wane, this dad was, infamously, left with a spare bedroom filled with worthless floppy limbed animal dolls with perky names.
Nobody laughed all the way to the bank with Beanies in hand except perhaps Ty Warner, owner of Ty, Inc, the creator of Beanies Babies. But, fate has a way of intervening. Warner was convicted of tax evasion in 2014 and sentenced to probation and community service.
Thank you, Asha. I thought maybe I understood crypto before, and now I discover I was correct. This is a valuable article.
Asha’s article got me thinking that, in addition to crypto, of all the other ways that Donald Trump‘s recent edicts could blow up in his face at any time. For one, his crippling of the science based public health agencies — when there is a severe concern that bird flu may set off another human pandemic — will leave us without the resources to fight and defeat another global scourge. When consumers discover that once again, prices are spiraling up at the checkout line due to tariffs on everything from imported produce to children’s clothes, who are they going to hold accountable after those pledges to reduce prices evaporate? Six months to a year from now, how will the combined effects of Trump‘s misbegotten executive orders will manage to make every American family feel the worse in one way or another?
Something is bound to happen. At present, we lack the foresight to know when and where and how severe the public reaction will be.