The Crypto Crises Are Coming by Simon Johnson (a 2024 Nobel laureate in economics)
https://www.project-syndicate.org/commentary/us-crypto-legislation-lacks-sufficient-regulatory-safeguards-by-simon-johnson-2025-08
Under its emerging legislative framework, the United States is poised to become a major hub for cryptocurrency-related activities. But in its eagerness to do the crypto industry’s bidding, Congress has exposed Americans and the world to the risk of severe economic damage, including massive job losses and wealth destruction.
https://www.project-syndicate.org/commentary/us-crypto-legislation-lacks-sufficient-regulatory-safeguards-by-simon-johnson-2025-08
Under its emerging legislative framework, the United States is poised to become a major hub for cryptocurrency-related activities. But in its eagerness to do the crypto industry’s bidding, Congress has exposed Americans and the world to the risk of severe economic damage, including massive job losses and wealth destruction.
The coming crypto crisis
https://www.ft.com/content/efc848c0-0990-4623-98ed-1176e97f04cb
Advocates talk about cryptocurrencies such as bitcoin as a hedge against traditional markets, but in fact, bitcoin is a “high beta” investment, meaning that it is highly correlated to the stock market. That means that both gains and losses relative to the S&P are amplified. Anything over a beta of one indicates a higher volatility than the market. A recent Fidelity report found bitcoin’s rolling 3-year beta to the S&P was 2.6.
https://www.ft.com/content/efc848c0-0990-4623-98ed-1176e97f04cb
Advocates talk about cryptocurrencies such as bitcoin as a hedge against traditional markets, but in fact, bitcoin is a “high beta” investment, meaning that it is highly correlated to the stock market. That means that both gains and losses relative to the S&P are amplified. Anything over a beta of one indicates a higher volatility than the market. A recent Fidelity report found bitcoin’s rolling 3-year beta to the S&P was 2.6.
Stablecoins: the next big financial crisis waiting to happen
https://www.telegraph.co.uk/business/2025/07/27/are-stablecoins-the-next-big-financial-crisis-waiting-to-ha/
Loosening the regulations governing digital currencies involves Wild West trade-offs.
https://www.telegraph.co.uk/business/2025/07/27/are-stablecoins-the-next-big-financial-crisis-waiting-to-ha/
Loosening the regulations governing digital currencies involves Wild West trade-offs.
The Hottest Business Strategy This Summer Is Buying Crypto
https://www.wsj.com/finance/currencies/crypto-treasury-e7ae573c
Small companies are raising billions of dollars to buy bitcoin and other, more obscure cryptocurrencies. What could possibly go wrong?
https://www.wsj.com/finance/currencies/crypto-treasury-e7ae573c
Small companies are raising billions of dollars to buy bitcoin and other, more obscure cryptocurrencies. What could possibly go wrong?
Eric Budish, Trust at Scale: The Economic Limits of Cryptocurrencies and Blockchains, The Quarterly Journal of Economics, Volume 140, Issue 1, February 2025, Pages 1–62.
https://doi.org/10.1093/qje/qjae033
Abstract
Satoshi Nakamoto (2008) invented a new kind of economic system that does not need the support of government or rule of law. Trust and security instead arise from a combination of cryptography and economic incentives, all in a completely anonymous and decentralized system. This article shows that Nakamoto’s novel form of trust, while undeniably ingenious, is deeply economically limited. The core argument is three equations. A zero-profit condition on the quantity of honest blockchain “trust support” (work, stake, etc.) and an incentive-compatibility condition on the system’s security against majority attack (the Achilles heel of all forms of permissionless consensus) together imply an equilibrium constraint, which says that the “flow” cost of blockchain trust has to be large at all times relative to the benefits of attacking the system. This is extremely expensive relative to traditional forms of trust and scales linearly with the value of attack. In scenarios that represent Nakamoto trust becoming a more significant part of the global financial system, the cost of trust would exceed global GDP. Nakamoto trust would become more attractive if an attacker lost the stock value of their capital in addition to paying the flow cost of attack, but this requires either collapse of the system (hardly reassuring) or external support from rule of law. The key difference between Nakamoto trust and traditional trust grounded in rule of law and complementary sources, such as reputations, relationships, and collateral, is economies of scale: society or a firm pays a fixed cost to enjoy trust over a large quantity of economic activity at low or zero marginal cost.
https://doi.org/10.1093/qje/qjae033
Abstract
Satoshi Nakamoto (2008) invented a new kind of economic system that does not need the support of government or rule of law. Trust and security instead arise from a combination of cryptography and economic incentives, all in a completely anonymous and decentralized system. This article shows that Nakamoto’s novel form of trust, while undeniably ingenious, is deeply economically limited. The core argument is three equations. A zero-profit condition on the quantity of honest blockchain “trust support” (work, stake, etc.) and an incentive-compatibility condition on the system’s security against majority attack (the Achilles heel of all forms of permissionless consensus) together imply an equilibrium constraint, which says that the “flow” cost of blockchain trust has to be large at all times relative to the benefits of attacking the system. This is extremely expensive relative to traditional forms of trust and scales linearly with the value of attack. In scenarios that represent Nakamoto trust becoming a more significant part of the global financial system, the cost of trust would exceed global GDP. Nakamoto trust would become more attractive if an attacker lost the stock value of their capital in addition to paying the flow cost of attack, but this requires either collapse of the system (hardly reassuring) or external support from rule of law. The key difference between Nakamoto trust and traditional trust grounded in rule of law and complementary sources, such as reputations, relationships, and collateral, is economies of scale: society or a firm pays a fixed cost to enjoy trust over a large quantity of economic activity at low or zero marginal cost.