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Crypto assets are a form of gambling

Purchasing crypto assets is a form of gambling. Crypto assets have no income and use value and are zero-sum games and thus have no fundamental value. Trying to time the market of crypto assets is equivalent to games of chance and gambling with a negative expected return. This is strictly worse behaviour than participating in price-formation in the stock and commodity markets.

Crypto assets are not gambling if one participates in a cartel which does pump and dump schemes or other forms of market manipulation which uses asymmetric information to defraud other market participants. Pump and dump schemes result in a net wealth transfer from the larger market to a small set of insiders.

References

  1. Sharma, Ruchira. 2022. ‘“Crypto Ruined My Life”: The Mental Health Crisis Hitting Bitcoin Investors’. Vice (blog). 16 February 2022. https://www.vice.com/en/article/akvn8z/crypto-bad-for-mental-health.
  2. Barrett, Claer. 2021. ‘Why Young Investors Bet the Farm on Cryptocurrencies’. Financial Times, 28 May 2021. https://www.ft.com/content/162839aa-0437-478b-a4d4-4a8d7ab71458.
  3. Powell, Jamie. 2019. ‘Crypto-Shills’. Financial Times. https://ftalphaville.ft.com/2018/11/29/1543469404000/Crypto-shills/.
  4. 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).
  5. Dhawan, Anirudh, and Talis J. Putnins. 2020. ‘A New Wolf in Town? Pump-and-Dump Manipulation in Cryptocurrency Markets’. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3670714.
  6. 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’. http://ssrn.com/paper=3303365.
  7. ———. 2018b. ‘The Economics of Cryptocurrency Pump and Dump Schemes’.
  8. Kamps, Josh, and Bennett Kleinberg. 2018. ‘To the Moon: Defining and Detecting Cryptocurrency Pump-and-Dumps’. Crime Science 7 (1): 18.
  9. Li, Tao, Donghwa Shin, and Baolian Wang. 2019. ‘Cryptocurrency Pump-and-Dump Schemes’. Available at SSRN 3267041.
  10. Xu, Jiahua, and Benjamin Livshits. 2019. ‘The Anatomy of a Cryptocurrency Pump-and-Dump Scheme’. In 28th USENIX Security Symposium, 1609–25.
  11. Corbet, Shaen. 2021. Understanding Cryptocurrency Fraud: The Challenges and Headwinds to Regulate Digital Currencies. Vol. 2. Walter de Gruyter GmbH & Co KG.
  12. Roubini, Nouriel. 2019. ‘The Great Crypto Heist’. Project Syndicate 16. https://www.project-syndicate.org/commentary/cryptocurrency-exchanges-are-financial-scams-by-nouriel-roubini-2019-07.
  13. Diehl, Stephen. n.d. ‘The Case Against Crypto’. Accessed 17 February 2022. https://www.stephendiehl.com/blog/against-crypto.html.
  14. Krugman, Paul. 2013. ‘Bitcoin Is Evil’. Paul Krugman Blog (blog). 28 December 2013. https://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil/.
  15. ———. 2018a. ‘Bitcoin Is Basically a Ponzi Scheme’. The Seattle Times 30.
  16. ———. 2018b. ‘Transaction Costs and Tethers: Why I’m a Crypto Skeptic’. The New York Times 21.
  17. ———. 2021. ‘The Brutal Truth About Bitcoin’. The New York Times 21.
  18. Taleb, Nassim Nicholas. 2021. ‘Bitcoin, Currencies, and Fragility’. ArXiv:2106.14204 [Physics, q-Fin], July. http://arxiv.org/abs/2106.14204.
  19. Weaver, Nicholas. 2018. Blockchains and Cryptocurrencies: Burn It With Fire. Berkeley School of Information. https://www.youtube.com/watch?v=xCHab0dNnj4.