Are crypto assets predatory investments?

Crypto assets are a form of predatory financial product.

Crypto asset market making is subject to extreme forms of market manipulation not found in other regulated markets. The price formation of crypto assets is untethered to any fundamental value and instead depends purely on the greater fool theory.

The price setting by crypto exchanges and order book design admits extreme forms of asymmetric information which privileges an economic cartel who can manipulate crypto assets to extract wealth from public from unfair market making.

The base economics of crypto assets make them negative sum which guarantees the amount of loses in the asset class exceed the gains.

Crypto assets are thus a form of predatory finance with negative expected-return much like gambling in a rigged casino.


  1. Shri T Rabi Sankar. n.d. ‘Cryptocurrencies – An Assessment’. Reserve Bank of India. Accessed 2 March 2022.
  2. ‘Bitcoin Pyramid Schemes Wreak Havoc on Brazil’s “New Egypt”’. 2022. AP NEWS. 22 January 2022.
  3. Corbet, Shaen. 2021. Understanding Cryptocurrency Fraud: The Challenges and Headwinds to Regulate Digital Currencies. Vol. 2. Walter de Gruyter GmbH & Co KG.
  4. Diehl, Stephen. 2021. ‘On Unintentional Scams’. 23 July 2021.
  5. Griffin, John M, and Amin Shams. 2020. ‘Is Bitcoin Really Untethered?’ The Journal of Finance 75 (4): 1913–64.
  6. Roubini, Nouriel. 2019. ‘The Great Crypto Heist’. Project Syndicate 16.
  7. Tozze, Arianna, Josh Kamps, Eray Arda Akartuna, Toby Davies, Florian Hetzel, and Shane D. Johnson. 2021. ‘Cryptocurrencies and Future Crime’. Crime Science 11 (1): 4.
  8. Xia, Pengcheng, Haoyu Wang, Xiapu Luo, Lei Wu, Yajin Zhou, Guangdong Bai, Guoai Xu, Gang Huang, and Xuanzhe Liu. 2020. ‘Don’t Fish in Troubled Waters! Characterizing Coronavirus-Themed Cryptocurrency Scams’. ArXiv Preprint ArXiv:2007.13639.
  9. Dhawan, Anirudh, and Tālis J Putniņš. 2020. ‘A New Wolf in Town? Pump-and-Dump Manipulation in Cryptocurrency Markets’. Pump-and-Dump Manipulation in Cryptocurrency Markets (August 10, 2020).
  10. Hamrick, JT, Farhang Rouhi, Arghya Mukherjee, Amir Feder, Neil Gandal, Tyler Moore, and Marie Vasek. 2018a. ‘An Examination of the Cryptocurrency Pump and Dump Ecosystem’.
  11. ———. 2018b. ‘The Economics of Cryptocurrency Pump and Dump Schemes’.
  12. Kamps, Josh, and Bennett Kleinberg. 2018. ‘To the Moon: Defining and Detecting Cryptocurrency Pump-and-Dumps’. Crime Science 7 (1): 18.
  13. Li, Tao, Donghwa Shin, and Baolian Wang. 2019. ‘Cryptocurrency Pump-and-Dump Schemes’. Available at SSRN 3267041.
  14. Xu, Jiahua, and Benjamin Livshits. 2019. ‘The Anatomy of a Cryptocurrency Pump-and-Dump Scheme’. In 28th USENIX Security Symposium, 1609–25.
  15. Krugman, Paul. 2013. ‘Bitcoin Is Evil’. Paul Krugman Blog (blog). 28 December 2013.
  16. ———. 2018a. ‘Bitcoin Is Basically a Ponzi Scheme’. The Seattle Times 30. ———. 2018b. ‘Transaction Costs and Tethers: Why I’m a Crypto Skeptic’. The New York Times 21.
  17. ———. 2021a. ‘Technobabble, Libertarian Derp and Bitcoin’. The New York Times 21.
  18. ———. 2021b. ‘The Brutal Truth About Bitcoin’. The New York Times 21.
  19. Taleb, Nassim Nicholas. 2021. ‘Bitcoin, Currencies, and Fragility’. ArXiv:2106.14204 [Physics, q-Fin], July.