Ben Hickey illustration of a snake with black and deep orange stripes squeezing bitcoin and other so-called stablecoins
© Ben Hickey

Three weeks ago, I used this column to explain why I was still not taking crypto seriously, despite the number of allegedly very serious and grown-up investors getting involved in it. Since then, the market has crashed by about 30 per cent, with many so-called “stablecoins” proving themselves to be anything but. Bitcoin’s value has now collapsed by more than half since its highs last year; Dogecoin’s by almost 90 per cent.

A reader wrote to me over the weekend to suggest a column idea: “This week, I was thinking you should write a massive ‘I told you so’ article :)”.

The truth is, it would be slightly disingenuous for me to claim that I did indeed tell you so. Arguing that crypto should not be taken seriously is not the same as arguing that it is about to crash, and in a market driven by little more than sheer faith — and whatever Elon Musk has just tweeted — trying to predict future prices is a fool’s game.

It would also be somewhat disingenuous for me to pretend I don’t take a certain amount of satisfaction from wealthy crypto bros seeming a little extra sensitive at the moment, or from seeing crypto exchanges that boast to their shareholders about how “greedy” they are missing their $1.5bn quarterly revenue targets.

But I take no joy from seeing retail investors, in the middle of a cost of living crisis, losing large chunks of their money to a market they were assured would only ever go up, or to “stable” coins they were told were just as reliable as the real currencies they were pegged to. Nor from seeing lists of suicide helpline numbers pinned to the top of Reddit forums.

So it seems more appropriate to use the latest market crash as an opportunity to make the moral argument against crypto. Because it’s not just that we should not treat it as a serious asset class; we also need to stop imagining that it is just all a bit of harmless fun.

I recently interviewed Jonathan Haidt, a social psychologist with a focus on morality. I took the opportunity to ask whether he had bought any crypto. To my surprise, the answer was yes — he had put more than 1 per cent of his money into it.

“I recognise it could go to zero, [but] it could go up multiple times . . . And if I don’t buy in at all, I would feel bad if it goes way up and I’d missed it,” he told me. I have heard variations on this from a number of people, and on the face of it, such “fear of missing out” seems reasonable.

But the crypto market is a “negative sum game”. That means it is not just “zero sum” — ie one person’s loss is another’s gain — but that on top of that it causes “negative externalities”, to use the market jargon. And the problem is that most of the people playing this game don’t even realise that they are.

The main environmental argument against crypto is that the carbon footprint produced by “mining” bitcoin and other coins outstrips that of *insert medium-sized economy*. According to a New York Times analysis, bitcoin mining uses 0.5 per cent of all the world’s electricity. That’s seven times more than that used by all of Google’s global operations.

There is also a growing e-waste problem: a recent study by researchers from MIT and the Dutch central bank estimated that the waste produced by every single bitcoin transaction — there are usually about 300,000 each day — is equivalent to that of two iPhones, due to the short lifespans of the mining hardware. You do the math, as they say.

The societal harms are harder to measure, but we can get an idea. For anyone who had put a large amount of money into Luna, which last week collapsed to almost nothing, this crash has been devastating; social media is full of accounts of suicide attempts and financial ruin. Then there are the all-out scams — estimated to have cost their victims $14bn in 2021.

And even without crashes and scams, the pyramidal structure of crypto is harmful in itself. It means that early adopters — who are still doing just fine, thank you very much — need constantly to recruit new members with false promises about how bitcoin is the future of money, or the latest dishonest tagline: “We’re all going to make it”, or #WAGMI.

“We” are not, in fact all going to make it — in a negative-sum or even zero-sum game, that’s impossible. The people using this line might, but that’s because they got in before everyone else. They are relying on the “greater fool” — which they hope includes you, dear reader — continuing to believe these lies and perpetuating their dishonest schemes.

Next time you think “what’s the harm in putting a bit of money into crypto?”, it might be worth remembering that’s not actually a rhetorical question.

jemima.kelly@ft.com

Letters in response to this article:

Crypto is no worse than gaming in a Goan casino / From JM Manchanda, New Delhi, India

Crypto, the dollar and Churchill on democracy / From Paul Drexler, Seattle, WA, US

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