Welcome to the Zombie Cryptocalypse

People have forgotten what unregulated markets are like. We’ve had 90 years of the SEC and reasonably regulated, well-behaved stock markets. And it turned out really well. People can trade in some sort of confidence that there are rules and so on. And people talk about crypto and Bitcoin and so forth as if this is a well-behaved, high-volume market where someone checking that nobody is just lying about everything. And none of that’s the case.

A pile of crypto is not a pile of capital that you can develop or invest or whatever. It’s just some stuff you can buy, sell, or hold. And early investors can only pay with money from later investors. There is no way “we’re all gonna make it” because it’s a game of winners and losers, and the winners are the big guys, and the losers are the moms and dads and grandmothers and the young people who are desperate in their economic situation and looking for “one weird trick” they can have to win.

This is all assuming there is no real-world use case for crypto stuff.

I won’t say that philosophically it’s impossible, but I will say that it hasn’t shown any sign of it in the 11 years that you’ve been able to exchange bitcoins for actual money, and all of Bitcoin’s various descendants. So I would say that the burden of proof is strictly on the advocates to come up with something.

I could try to make the argument for it.

But you would have to use the words future, could, possibly, hypothetically, may, might, and all these other words that mean “don’t.” All these other words mean, “It absolutely doesn’t do any of these things. I’m just trying to get you to think as though it does, even though it doesn’t.”

Well, the argument would be that, as real-world use cases for blockchains catch on, driven by issuing crypto tokens that have actual economic value within real networks, the tokens won’t all be magic beans.

All of these things where “we’ve got a use case for blockchain” it’s this strange function that we could totally do without blockchain. We’ve bolted a blockchain on for implausible reasons, and by the way, there’s a token that you can totally make money from in it. There were coins for journalism on this basis, coins to solve the banana market for this basis, coins to solve dentistry on this basis.

The thing that makes this such a puzzle is that everything you’re saying has been out there for years, yet the party continues. There’s a concept in economics, the efficient-market hypothesis, which says that asset prices should generally reflect all the available information—

The strong version of the efficient-market hypothesis is hilariously false, and crypto proves it.

I agree with you, but the point I was going to make was that, for example, a couple of weeks ago, Sam Bankman-Fried, who’s the CEO of FTX, which is one of the larger crypto exchanges, admitted that a lot of crypto products are Ponzi schemes. And yet so many people still have not fled the market. I guess what I’m wondering is, if this is not the cryptocalypse—if this is just another crypto winter that will eventually give way to further crypto springs and summers—then what would need to happen for crypto to permanently crash?

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