Economy Paris Marx

Crypto’s Hype and Promises Were Based on Lies From the Very Beginning

As usual with the tech industry, cryptocurrencies weren’t just sold as a risky investment — they were framed as a social good. Now that the crash has ruined lives, those who promised societal transformation through crypto should be held accountable.

By Paris Marx / Jacobin Magazine

The values of major cryptocurrencies have been sliding for months, but the crash entered a new phase last week. TerraUSD (or UST) was the third largest stablecoin on the crypto market, while Luna was the fourth most valuable cryptocurrency by market valuation. But now both are virtually worthless — and a lot of people have lost a lot of money.

Posting on the r/terraluna subreddit, one user wrote, “I lost all my life savings.” Another said the same, declaring “I’m out of crypto.” Others posted about the tens and even hundreds of thousands of dollars they’d lost, and how it would mean they wouldn’t be able to buy a house — or could lose their homes altogether. Eventually, moderators restricted new posts and pinned international suicide hotlines to the top of the page as people with huge losses said they saw it as their only way out.

After a year of exuberance, the crypto winter is here, and it’s not clear there will ever be a spring. The promises that coin values would go “to the moon” have given way to a rapid decline, while the slang term “wagmi” — “we’re all going to make it” — seems like a cruel joke. Enthusiasts used to chide critics by telling them to “stay poor,” but now that’s the situation of many of the people who put their money into the digital assets based on the lies of those with much less to lose.

Boom and Bust

Crypto values started to rise at the end of 2020, kicking off a mutual reinforcing cycle that kept the line going up. Venture capitalists flooded money into the space, tech workers took jobs at crypto start-ups, and the media was happy to report on all the money changing hands. The headlines about the high returns that a select number of people were making and the conviction of many supporters that crypto could only appreciate convinced a lot of people to risk their money on highly volatile assets.

As usual with the tech industry, cryptocurrencies couldn’t just be sold as a risky investment; they had to be framed as a form of social good. Spike Lee starred in an ad promising crypto would empower marginalized groups, some internet advocacy organizations asserted it was the path to decentralization, and a whole range of groups deployed exploitative blockchain projects in the Global South claiming they would help locals. It wasn’t hard to see that there was nothing to these claims, but many people wanted to believe in the benevolent power of technology.

In November 2021, just weeks after Matt Damon appeared in an ad enticing people to buy into crypto with the slogan “fortune favors the brave,” the values of cryptocurrencies and related products like NFTs started to tank. Bitcoin and Ethereum, the two largest cryptocurrencies, hit respective peaks of around $69,000 and $4,900 that month, but had lost half their value by January. Over that same period, average NFT prices fell by 48 percent, while trading volumes on OpenSea, the biggest NFT marketplace, plummeted by 80 percent. The collapse of UST and Luna, along with the Anchor lending protocol, will further shake people’s confidence in crypto assets.

Going to Zero

Stablecoins are supposed to provide stability for crypto investors by pegging themselves to a fiat currency like a US dollar, thus making it easier for traders to move their money in and out of crypto assets. There have long been questions about the stability of stablecoins, including ongoing concerns about what’s backing Tether, the largest of them all. But UST had no backing beyond other cryptocurrencies.

UST is an algorithmic stablecoin that was supposed to maintain its peg to the US dollar through a complex process of minting and burning Luna tokens, but that all broke down on May 9 when it fell to eighty cents. Terraform Labs tried to restore the peg, but instability in UST caused the price of Luna to crater, making it virtually impossible. Luna traded at over $110 last month, and some enthusiasts used to assert it was going to hit $1,000 in the years to come. But now it’s worth a fraction of a penny, while UST sits below twenty cents.

The collapse of UST and Luna naturally caused the rest of the crypto market to fall with it, though not to such extreme degrees. Bitcoin fell to nearly $25,000, while Ethereum touched $1,700 — lows they haven’t seen in many months. To put it in perspective, the total value of digital assets was estimated at $3.2 trillion in November 2021, but had fallen to $1.9 trillion by early May. In the past week, it dipped to $1.3 trillion. In the process, it wiped out the savings of a lot of people who bought into the hype.

Selling a Scam

For the past year and a half, it’s hardly been a secret that the crypto market was incredibly shady, if not a giant Ponzi scheme that relied on people buying in so those at the top could cash out with their money. Scammers made off with $14 billion in crypto last year alone, and as of May 9, 40 percent of Bitcoin holders were already estimated to have lost money on their holdings.

When you pair the crypto crash with rising inflation and higher interest rates, it’s likely more people will give up HODLing — meaning “holding on for dear life” — and cash out, continuing the crypto market’s slide and the pain for those who risked too much on crypto investments. The founders, the investors, and the whales — those with large crypto holdings — should shoulder the blame for the devastation being felt by all the people duped into their scams, and if regulators and authorities have any teeth they should be held to account.

But we also shouldn’t forget everyone else who helped them sell their lies: the organizations that took the industry’s money to reframe scams as empowerment; the workers who flooded into the digital Ponzi industry; the journalists who desperately wanted to believe the PR spin; and the celebrities who helped convince their fans to buy in. They should feel ashamed for contributing to the devastation we’re now seeing and convincing more people to enter the crypto market only to have their money stolen by the whales.

There’s a long history of people within the tech industry rebranding themselves as concerned advocates of change once they’ve made their money through exploitative practices they later claim to oppose, but that can’t be allowed to happen this time. All those who helped sell the crypto scam should all wear their participation as a badge of shame — and they should hope and pray their actions have only cost livelihoods, not actual lives.

Paris Marx

Paris Marx is the host of the Tech Won’t Save Us podcast and author of Road to Nowhere: What Silicon Valley Gets Wrong about the Future of Transportation, coming in July from Verso Books.


  1. No surprise here – anyone familiar with the original Pinnochio (not the Disney version) will recognize the Fox and the Cat convincing Pinnochio to bury his school money beneath a tree where it will multiply overnight …

    And then there’s The Emperor’s New Clothes – the invisible currency …

  2. Bullshit. The crypto market is currently down largely due to the failure of one project attacked at a vulnerable point from a source most likely originating from within traditional finance. Anyone ruined by this event made the fundamental investment mistake of overinvesting all their eggs in one basket.

    The crypto market has exhibited great volatility over the relatively brief course of its history, though this shows signs of decreasing as Bitcoin becomes more widely adopted. Established projects such as Bitcoin and Ethereum are almost certain to rebound as they always have in the past, through periods of much sharper downturns than the current one. There’s just too much adoption having taken place over recent times by formerly hostile financial institutions and even whole countries. Essentially, the point one percent who own the politicians who write U.S. financial law have now put their money into crypto. There’ll be a period of sorting out a regulatory framework but if this is done intelligently, that should benefit the market in the long run.

    Every time there is a temporary downturn in the market, financial Luddites like Mr. Marx show up to naysay the concept. His point that the potential for positive social good resulting from crypto is a con is apparent as a lie to anyone willing to take long enough to consider what a currency outside of complete control by any governmental entity might have over, say, U.S. fiat currency – which is threatening to go into hyperinflation due to out-of-control money printing versus Bitcoin, which is capped at a total supply of twenty-one million coins. Or the Cardano project of Charles Hoskinson, which has the important goal of providing a financial structure for those left completely outside of traditional financial systems in third world countries.

    As for its potential value as an investment, consider that the value of the original crypto, Bitcoin, in March 2020 was $3000. And that its current value (in the doldrums of the market downturn Mr. Marx is portraying as apocalyptic) is over $29,000. In fact, my understanding is that no one who bought Bitcoin at any point in its thirteen year history was ever in a position of having lost money if they held on to it for at least three years. So the despite short-term dips in value, the long-term trend is clearly up. That’s an asset that is available to a far wider range of people than most traditional assets and gives the common people a way of gaining some level of financial security as opposed to having their money sit in a bank, steadily degrading in value due to the policies of a federal government indifferent to their well-being.

      1. Spoken like someone who has no idea what they’re talking about, just like the author of this absurd article. There are actually mechanisms OTHER than PoW. (Proof of Work, so you can look it up.) Instead of painting the entire asset class with a broad brush, you and the author should put a little effort into learning about it or just stay silent. How do you even convince yourself you’re different than those within the crypto industry who spread misinformation?

    1. Sorry. I went back and checked the records and it seems that my statement in the above comment that the value of Bitcoin “in March 2020 was $3000” should have read “at one point in March 2020 was around $4500.” But the point stands.

      1. As to the criticisms made here that crypto mining contributes to global warming – well so does much other human activity in industrialized societies. As to the concern that it is contributing an outsized negative impact on global warming, that concern, if it was ever valid, is becoming ever less so. There has been a massive switch of crypto mining to green energy sources over the course of the past year. Mainly stimulated by moves to areas where green energy is relatively inexpensive (a lot of it has moved to Texas, for example). In addition, some locations are introducing laws to require that mining activities rely on green energy.

        The criticism that crypto “does not produce value in and of itself” is not really accurate in that a number of cryptos do have use cases, such as Ethereum. Besides, as to issues of intrinsic value, it’s certainly no less lacking in that area than is fiat currency – the U.S. dollar went off the gold standard in 1971. And when one considers that maintenance of the U.S. dollar as the primary global currency of exchange relies in large part of the intimidating factor of the entity with the largest carbon footprint of any on the planet – the U.S. military – the appeal of crypto becomes even more clearly focused.

    2. It looks right now, like my comment (still pending) deriding the article and another commenter may have inadvertently been directed at you.
      If so, it was meant for someone else and what was meant to go to you was, “Well said. What a ridiculous, ignorant article.”

      1. Hendrix: I got that. I’ve never posted on scheerpost before (which generally, in my opinion, posts very worthwhile articles) and so I was kind of unsure of the layout of comments. As they appear on my screen, everything seemed to be showing up in consecutive order, so I just placed subsequent posts as follow-ups to my original one. Which may have been the source of any confusion.

        Thanks for introducing the point to the conversation thread that the proof of work mechanism is largely being moved away from to less energy-intensive methods. As you’re no doubt aware is currently being done with Ethereum.

  3. From 2017:

    Below please find Reasons why as currently advertised Bitcoin [BTC] implementation may be good for speculations but not be a viable 21st Century Peoples’ Money?

    Unclear origin and identity of creators defies a notion of transparency claimed.
    While mathematically Bitcoin supply is limited already most nominal bitcoins have been mined and reportedly 50% nominal value in hands of two entities (2017) only and 70% in hands of 1000 entities only defies a notion of equitable distribution of wealth in bitcoin units, resembles structure of market manipulation (similar for FED fiat market) or Ponzi scheme of early entries scamming later entries.
    Current Bitcoin software implementation/network implementation defies the stated principle of transparency and autonomy of the transactions while in fact all Bitcoin servers as well as Bitcoin exchange servers implementations so far require some kind of third party authentication or authority established, mostly for reason of security, efficiency or expediency of Bitcoin transfer in order to avoid increasing network latency.

    Bitcoin deposit accounts are fee based and hence defy stated notion of nearly cost-free Bitcoin currency system and transfers and practically became purely notional and fractional. While Bitcoin deposit accounts supposedly designed to prevent theft or loss of Bitcoins residing on user devices due to their hacking or physical destruction and unrecoverability, in fact they became a “paper” bitcoins and like notional “paper” gold certificates where there is not enough gold for redemption of entire notional value in physical gold at one time, there is not enough bitcoins (capital) within given institution/Bitcoin Exchange for redemption their of entire notional value of bitcoin deposits and the fractionality of those bitcoin financial services only grows and often has led to collapse of the financial institutions that provided them in the past due to insider fraud, hacking etc.,. as they are based on nothing but a confidence scheme. So in fact you are not holding Bitcoins but a deposit certificate for bitcoins, an old banking arrangement backed by fiat money, not 21st century innovation.

    The corruptibility of the Bitcoin network itself is of big concern. Taking over 50%+ of all active at given time, Bitcoin transactions processing nodes (“Proof of Work” Processing Nodes), and hence enabling those who control 50%+ nodes to legally steal Bitcoins, has already been documented. Although it is at this point still technically costly it may likely provide avenue for disruption or hijacking Bitcoin exchanges and prevent transfers.
    Worrying machinations of Bitcoin foundation and conflict of interests of its members defies stated notion of wider Bitcoin democratic community setting the rules and instead special interest seem to control Bitcoin standard specifications.

    Severe problems with Bitcoin network latency and reaching adequate SLA levels and transaction speed dramatically dependent of the volume, which is slowly increasing while practical usability of the system collapses. A proposed remedy to it such as increasing of the size of the block in the blockchain prefers concentrated processing power and reduction of number of Bitcoin processing nodes, a possibility of differing transaction speeds, higher for capital rich players and slower for grunts and by that defies Bitcoin stated egalitarian principle and dangerously concentrates the power of few over BTC infrastructure.

    A sleuth of new competing digital currencies some openly backed or run by competing global financial institutions and banks with huge capital and political connections to government, all in the background of unsettled legal framework and hence a potential huge tax or even criminal liability. All that defying spirit of Bitcoin as defined by its creator(s).

    Huge volatility of bitcoin markets and repeated lack of adequate liquidity of bitcoin as an asset due to hoarding Bitcoins by investors [a form of Bitcoin Mercantilism] treating it as a hedge for currencies like Dollar, Yen, Yuan or Euro and not interested in building BTC infrastructure and transacting with Bitcoins as a currency, paying bills, invoices etc., but only as temporary speculative store of value waiting for fiat currency collapse. Again all that defies the bitcoin notion of near zero-cost, interest free peoples’ circulating currency alternative holding value against government-run insane fiat money printing, free of financialization schemes such a attempts for Bitcoin BTC ETF.

    Massive, shadowy, agressive Bitcoin Astroturf supported by misinformation, obfuscation and propaganda hype [ a financial apocalypse is coming, buy BTC loud claims] recently peddled not only by an alternative business media outlets that usually peddle Silver/Gold commodity investments [ Gold is real Money incessant theme] but also from business MSM which more and more give time and credence to the Bitcoin after more and more Bitcoin egalitarian principles, practices and ideas are gutted in latest implementation of BTC infrastructure and/or more Wall Street speculators take BTC portfolio positions. It is always suspicious when a clear target of Bitcoin revolution seems to join in BTC praising choir.

  4. One thing I’ve noticed is that once people buy Bitcoin, they become big supporters. It’s almost like if they get me to buy some, there’s something in it for them.

    1. It is simple . It is a Ponzi scheme. Anybody who gets in must exponentially amplify hype so he could sell BTC to more newly recruited Ponzi schemers for more.

      1. 1. Create a “thing” out of thin air, and quite a few to boot.
        2. Hold on to several, cynically call it an asset.
        3. Pump it up, create its mystique, thereby a buzz, get people to buy it.
        4. More people buy it, the higher the price goes.
        5. Higher the price goes, the value of these things skyrockets, thereby enriching the people from steps 1 & 2 in wild fashion.
        6. Those from steps 1 & 2 then sell some, thereby cashing out in massive quantity. They don’t have to sell a lot of their “assets” to make a lot of money. But they still hold onto some.
        7. The more money that flows back to them, the more the price plummets.
        8. The more the price plummets, the lower the value of those from steps 3 & 4.
        9. The assets held by those from steps 3 & 4 lose value. Lots. And it’s cynically dismissed as them making “fundamental mistakes”.
        10. Those from steps 3 & 4 then sell their “assets” quickly to minimize the loss, to stop the bleeding.
        11. More selling off means the price plummets even further to even lower than in step 7. Because it compounds the selling off from step 6.
        12. Now that the price is even lower, those from steps 1 & 2 buy up those that were offloaded from step 10.
        13. Repeat step 2.
        14. Repeat step 3.
        15 Repeat step 4.

        “A strange game. The only winning move is not to play.”
        Joshua, “War Games”, 1983.

      1. Yup, it’s hard to tell whether the deluge of defensive “enthusiasts” here are True Believers or want to find Greater Fools and get out. Probably both. Of course crypto was always a scam. And quite unlike “fiat” currency like the dollar, which contrary to ignorant statements (found in most economics texts :-)) has enormous value backing it, unlike crypto. The only one that seems to have any chance of not going to zero is bitcoin, because it does have a genuine demand – for shady, criminal transactions. That’s kind of a winner take all market.

  5. I agree with Charles. This is a genre of schadenfreude journalism that panders to current market sentiments, conflates every asset in the market, and has a “told ya so” punch that only makes sense in short-term time frames. There are plenty of meaningful points to be expanded on here regarding VC involvement and the marketing games that are played to help skim profits for limited partners. There is also a cottage industry of financial advisor personas that earn their keep with irresponsible, sensationalized shilling. Also, forget the fact that the stock market has entered bear territory and the macroeconomic scene is more concerning than it’s been for decades. Instead of engaging meaningfully with any of this, we are left with the same old dismissive tropes and the archetypes of the ignorant or swindling “enthusiast”.

  6. Crypto coinage “value” is generated by massive energy-gobbling computers. It contributes to climate warming. Besides that, it is in a sense “free loading” in that it does not produce value in and of itself.

  7. Economics is my lowest political priority and the one I know the least about. But I never got the whole idea of crypto currency, except maybe money laundering and other nefarious things.

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