I believe crypto is a scam. When one tries to express this view to a coiner, the reaction is pretty predictable, and I can understand it.
“It’s not a scam! I know (blank) person who’s made $x. Crypto has the same backing as fiat!”
Part of the problem in communicating this is that crypto skeptics jump to the pyramid scheme explanation. I don’t really think this is right. Sure, an earlier investor can make a profit by selling to a greater fool. I think that most coiners have internalized this – they justify their belief because they tacitly believe that they’ll be early adopters and develop large downstreams. While I certainly don’t like pyramid schemes, most people are familiar with them in some degree, and recoil at the idea of them being scams. Maybe they’re not great investments, but not scams, because it’s peers doing business – the upper level just usually wins. I don’t believe if you buy bitcoin at $20k from someone who bought it at $500, that’s necessarily wrong, even if your choice to buy it at $20k was uninformed.
Crypto is a scam because it’s not a pyramid scheme. It is not false advertising, it is fraud. Binance, FTX, Bitfinex/Tether, Crypto.com, and legions of other real organizations are manipulating the public into handing over their money.
The most genius part of this fraud is the way the fraudsters have insulated themselves from regulation. Because the only way a coiner can recoup any value from their investment is to pass it off to a greater fool, the exchanges have an obedient army at their disposal.
Wash trading
Today, a Forbes investigation looked at Bitcoin trading, assessing:
- Where is bitcoin traded?
- How much bitcoin is traded daily?
- How do those trades occur?
“More than half of all reported trading volume is likely to be fake or non-economic. Forbes estimates the global daily bitcoin volume for the industry was $128 billion on June 14. That is 51% less than the $262 billion one would get by taking the sum of self-reported volume from multiple sources.”
My prediction is that by 2025, crypto believers will be viewed in the same light as Scientology or MLM espousers (50% likelihood.) I think you have to be willfully deceiving yourself at this point to ignore every. single. red. flag.
In the case of NFTs, the prevalence of wash trading quickly became pretty widely accepted. What’s the reason that this same exact scenario couldn’t be happening with crypto? US centralized exchanges most likely are not wash trading due to regulation. But US DEXs and foreign exchanges have no such restrictions, and those makeup the majority of purported crypto “volume.”
I’ll continue to add examples of crypto fraud to this blog post as I build my digital garden.