Today, President Trump announced that the US Government would begin using taxpayer dollars to systematically buy up a variety of cryptocurrencies. Crypto prices shot up on the news.

This is revealing, as crypto boosters have argued for years that cryptocurrency has legitimate economic value as a payment system outside of the government’s purview.

Instead, those same crypto boosters are now tapping the White House for money — in US Dollars, coming from US taxpayers.

Why?

Crypto has been one of the biggest speculative bubbles of all time, maybe the single biggest ever. Millions of retail investors have piled into crypto assets in the hope and expectation that prices will continue to go up. (Notice how much of the chatter around crypto is always around prices, as opposed to non-speculative uses.)

However, every bubble bursts once it runs out of gamblers to put new money in, and it may be that the crypto community believes that that time is near for crypto, as they are now turning to the biggest buyer in the world — the US Government — for help.

This shows that all the claims that crypto leaders have made for years about crypto’s value as a currency outside of government control have been self-serving lies all along: the people who have most prominently argued that position are now begging the White House to hand them USD for their crypto.

It also reveals how much crypto has turned into a cancer on our entire society.

In previous Ponzi schemes, the government has often stepped in to defuse bubbles and protect retail investors from being taken in by scammers.

But in this wave, not only has the government not stepped in to stop the scam, it has now been captured by people with a vested interest in keeping it going as long as possible.

Our president and a number of members of his inner circles hold large amounts of cryptocurrency and have a vested interested in seeing its value rise — Trump’s personal memecoin being a particularly notable example. And many other people in the corridors of power in Washington and Silicon Valley are in the same boat. “It is difficult to get a man to understand something, when his salary depends on his not understanding it”, and so some of the most prominent people in the country are now prepared to make any argument and implement any policy decision to boost the value of their crypto holdings.

How does this end?

Once the US taxpayer is tapped out, there’s not going to be any remaining larger pool of demand to keep crypto prices up, and in every previous speculative bubble, once confidence evaporates, prices will fall, probably precipitously. Unfortunately, as millions of people now have significant crypto holdings, and stablecoins have entangled crypto with fiat currency, the damage to the economy may be widespread.

The end of the crypto frenzy would, in the end, be a good thing. Cryptocurrency has a few legitimate uses, like helping citizens of repressive regimes avoid currency controls and reducing fees on remittances. But it has also enabled vast evil in the world. Diverting trillions of dollars away from productive investments into gambling is bad enough, but the untraceability of crypto has also enabled terrorist organizations, criminal networks, and rogue states like North Korea to fund themselves far more effectively than ever before. I’ve been hearing from my friends in the finance world that North Korea now generates a significant fraction, if not a majority, of its revenues by running crypto scams on Westerners, and that the scale of scams overall has grown by a factor of 10 since crypto became widely used (why do you think you’re getting so many calls and texts from scammers lately?)

I hope that the end of this frenzy of gambling and fraud comes soon. But in the meantime, let’s hope that not too much of our tax money goes to paying the scammers, and that when the collapse comes it doesn’t take down our entire economy with it.

Thanks to Alec Bell for helping edit this essay.