Source: The Economist
Cryptocurrency is not the future of finance—it is the future of financial catastrophe, and if Wall Street ties itself to this unstable market, the next recession will be written in blockchain. The last time the world blindly trusted an unregulated financial system, we got the 2008 crisis—this time, with crypto in the mix, the collapse will make Lehman Brothers look like child’s play.
If financial markets were a casino, cryptocurrency would be the wildest table in the house—a game where the rules change mid-play, the odds favor the house, and the chips may disappear overnight. Yet, President Trump seems intent on pulling up a chair, placing the United States economy squarely in the game. In one of his executive orders, he declared that digital assets would play “a crucial role in innovation and economic development in the United States, as well as our Nation’s international leadership.” This is no minor endorsement. When a former president—and likely presidential contender—throws his weight behind cryptocurrency, the entire financial landscape shifts. And while his enthusiasm might excite Bitcoin believers, for the rest of us, this should ring alarm bells. Because if history has taught us anything, it's that crypto’s volatility, lack of regulation, and deep entanglement with fraud and speculation are a recipe for disaster.
I have never viewed cryptocurrency as a reliable financial asset. I am not a fan of any asset that can skyrocket overnight and then plummet into oblivion for reasons that nobody can fully explain. The crypto industry, despite its promises of decentralization and innovation, has a reputation that is anything but trustworthy. It is, after all, the same industry that gave us Sam Bankman-Fried, the founder of FTX, who was sentenced to 25 years in prison for orchestrating a fraud so elaborate that it wiped out billions of dollars in investor funds. But he is just one of many.
Take Do Kwon, the mastermind behind TerraUSD and Luna, two cryptocurrencies that collapsed in 2022, erasing $40 billion in value practically overnight. Kwon, once hailed as a genius in the crypto space, is now a fugitive, facing criminal charges in multiple countries. His so-called "stablecoin" was anything but stable, and its collapse sent shockwaves through the industry, bringing down hedge funds and leaving retail investors with empty pockets. Then there’s Ruja Ignatova, better known as the "Crypto Queen." She ran OneCoin, a fraudulent cryptocurrency scheme that defrauded investors of over $4 billion. Ignatova vanished in 2017, and she remains one of the FBI's most wanted fugitives.
If that weren’t enough, we have the case of HyperVerse, a cryptocurrency hedge fund that imploded in 2024, costing investors approximately $1.3 billion. Investigations later revealed that its supposed executive director, Steven Reece Lewis, never actually existed—he was nothing more than a fabricated persona used to lend credibility to the scam. And let’s not forget BitConnect, which promised outrageous returns to investors before collapsing in one of the largest Ponzi schemes in crypto history.
This pattern is not an accident. Cryptocurrency has proven time and again to be the financial Wild West, where fraudsters flourish, regulations are nonexistent, and the market is driven more by hype than by actual value. So when President Trump signals that he wants crypto to be a key part of America’s economic future, one has to wonder—does he not see the risks, or does he simply not care?
One of the biggest dangers of Trump’s embrace of cryptocurrency is the potential for it to destabilize traditional financial institutions. If crypto prices become closely tied to banks, the risk of financial contagion increases dramatically. We’ve already seen this play out in real-time. Silvergate Bank and Signature Bank, two major financial institutions that heavily invested in crypto, collapsed in 2023. Their downfall was not a mystery—it was the result of a broader downturn in the crypto market, which began in late 2021 and was exacerbated by FTX’s collapse. These banks bet heavily on digital assets, and when the market turned, they found themselves exposed, triggering a crisis that spread far beyond the crypto world.
It doesn’t take a genius to see where this could lead. If more traditional banks tie themselves to crypto markets, then every major downturn in Bitcoin, Ethereum, or other digital assets could have ripple effects throughout the financial system. The instability of crypto will not remain isolated—it will spread, pulling institutions, investors, and even everyday bank account holders into the chaos. And yet, despite all of these glaring warning signs, President Trump seems determined to push forward.
What makes his position even more concerning is the increasing overlap between Wall Street and cryptocurrency. Major financial institutions, once skeptical of digital assets, are now dipping their toes into the market. Some have started offering crypto investment products, while others are exploring blockchain integration. But if this merger between traditional finance and blockchain is not carefully managed, the consequences could be catastrophic. If the government begins treating Bitcoin like a reserve asset, or if major financial institutions rely on crypto as a core component of their portfolios, then any major price crash could trigger a full-blown financial crisis.
One of the most dangerous aspects of Trump’s approach to cryptocurrency is the illusion of legitimacy. When the leader of the free world champions digital assets, it sends a message that they are safe, reliable, and worthy of investment. But as history has shown, this is a dangerous misconception. The moment the crypto market crashes again—and it inevitably will—investors will find themselves staring at empty accounts, banks will face liquidity crises, and the entire economy could be placed in jeopardy. And when that happens, who will be left holding the bag? Not the fraudsters who disappear with billions, not the hedge funds that short the market at the right time. It will be ordinary investors, pensioners, and taxpayers who suffer.
President Trump has never been one to shy away from risk, but gambling with the financial security of the American people is not leadership—it is recklessness. A responsible government would prioritize financial stability over speculation, regulation over volatility, and economic security over the empty promises of blockchain evangelists. Yet, instead of learning from past mistakes, the administration appears to be doubling down on the very thing that has proven time and again to be a ticking time bomb.
In the world of finance, trends come and go, but principles remain the same. Real wealth is built on sound investments, regulations, and long-term value, not on hype-driven bubbles that can burst at any moment. Cryptocurrency may well have a place in the future of finance, but it cannot be the backbone of a stable economy. If history is any indication, allowing crypto to infiltrate the traditional financial system without strict oversight will lead to chaos. And when that happens, the same people who cheered its rise will be nowhere to be found.
It is said that those who fail to learn from history are doomed to repeat it. If the United States does not tread carefully in its embrace of cryptocurrency, it may find itself relearning a very painful lesson. Because while fortune may favor the bold, the house always wins. And in the case of cryptocurrency, the house is made of smoke and mirrors.
No comments:
Post a Comment