Cryptocurrency?
Over millennia, money has functioned across human civilizations serving as: (1) a unit of account, (2) a medium of exchange, and (3) a store of value.1 From the use of barter in primitive neolithic societies, to the minting of shekels in ancient Mesopotamia, to the advent of paper money in ancient China, money evolved continuously in the ancient world allowing peoples to coalesce around trade routes and establish the first city centers and modern states. In the course of human history, money has been a precondition for both commerce and the formation of advanced empires.
Cryptocurrencies,2 such as Bitcoin, are one of the most recent nodes in the long evolution of money. Cryptocurrencies have been hailed as a decentralized means of exchange that will usher in a new age of free market capitalism. But their billing has yet to materialize. To date, cryptocurrencies have not been widely adopted as a mainstream medium of exchange. Nor does recent history suggest that Bitcoin or other cryptocurrencies are a trustworthy store of value.
Many experts in economics and finance argue that cryptocurrencies exhibit characteristics of Ponzi schemes and that their true value is zero. Other authorities state that the prevalence of cryptocurrencies could weaken the dollar’s standing as the world’s reserve currency and the ability of the Federal Reserve and other central banks to effectively set monetary policy. The conclusion from many is that cryptocurrency is more likely a speculative asset bubble than a sustainable monetary innovation. Based on leading voices from academia, economics, and finance, it would seem economically unwise to push for greater acceptance of cryptocurrencies like Bitcoin into mainstream usage.
The Rise of Cryptocurrencies
Cryptocurrencies trace their origins to the early 1980s, when cryptographer David Chaum introduced the concept of electronic money with eCash. The first cryptocurrency, Bitcoin, was released in 2009 as an open-source software based on the 2008 White Paper3 authored by the pseudonymous Satoshi Nakamoto.4 Built on blockchain technology,5 Bitcoin was promoted as a decentralized digital currency that was destined to replace fiat currencies. The birth of Bitcoin has spawned a mass proliferation of cryptocurrencies. As of August 2025, 17,548 cryptocurrencies were in circulation with a total market capitalization of $3.97 trillion dollars.6Bitcoin itself accounts for $2.23 trillion of the total market capitalization,7 with Ethereum accounting for $558 billion in market capitalization,8 and Memecoins accounting for over $70 billion in market capitalization.9
Fiat vs Decentralized Currencies
Since America’s abandonment of the Gold Standard in 1971, all the world’s major currencies have transitioned to fiat currencies. Under fiat currency systems, money receives its value from the public’s trust in the sovereign issuers of the currency, and monetary policy is controlled through a central bank. One of the most prominent features of Bitcoin, Ethereum, and other cryptocurrencies that operate on blockchain technology is that they are decentralized. Decentralized currency systems have no central bank or centralized authority exercising control or decision-making power over them. Rather, cryptocurrencies built on blockchain rely on distributed peer-to-peer computer networks to verify transactions and maintain the system’s integrity.
Digital Gold?
The United States Treasury Department has labeled Bitcoin as “digital gold” in a decentralized finance world.10 However, cryptocurrencies such as Bitcoin exhibit several significant differences compared to gold. For thousands of years, gold has been used as a safe haven and effective hedge against inflation, currency devaluation, and economic uncertainty. Though scarce, gold is not limited in supply, its available quantity continues to increase over time. Gold is a precious commodity that is valued outside of finance for its use in aerospace, dentistry, electronics, jewelry, medicine, and other industries.
Significantly, many cryptocurrencies, like Bitcoin,11 are limited in supply. The “hold on for dear life” (HODL) investment strategy,12 prevalent among cryptocurrency investors, has further reduced their supply.13 The scarcity of many cryptocurrencies is responsible for large price swings and high volatility. Instability in cryptocurrency prices and the cryptocurrency markets themselves undercut the asset class as a haven or effective store of value. Whereas gold’s stability is prized by investors as an effective hedge against market fluctuations, cryptocurrency’s volatility lends itself better to speculators seeking to profit from large price movements. The fact that cryptocurrencies are not commodities and cannot be used in finished products14 additionally weakens comparisons to gold.
Tulip Mania?
Cryptocurrencies also lack many of the characteristics associated with traditional financial assets: they do not generate dividends like stocks, interest like bonds, or cash flow like real estate.15 Even the intended purpose of cryptocurrencies outlined in Nakamoto’s 2008 White Paper – to be a decentralized medium of exchange for peer-to-peer transactions – has not materialized. Real world cryptocurrency transactions are expensive and cumbersome.16 Most financial experts associate cryptocurrencies with facilitating illicit activities such as money laundering, sanction avoidance, terrorist financing, and drug dealing rather than with any significant legal, everyday economic activities.17 The decision by El Salvador, the first and one of the only countries, to recognize Bitcoin as fully legal tender has resulted in devastating consequences for the Nation’s struggling economy.18
Having failed to establish cryptocurrencies as a legitimate medium of exchange, proponents have shifted focus and begun to argue that cryptocurrencies like Bitcoin provide utility as a long-term store of value. However, cryptocurrency’s ability to store value over time is highly suspect. Many experts view the market capitalization of Bitcoin as a bubble and its fair market value to be zero.19 The May 2022 collapse of stablecoin TerraUSD (UST) and its sister token LUNA,20 and the subsequent November 2022 collapse of cryptocurrency exchange FTX and its native coin FTT (FTX Token)21 highlight the potential of huge future losses for investors. The memecoin market, consisting of prominent coins such as Dogecoin (DOGE), Official Trump (TRUMP), Fartcoin (FARTCOIN), and Hawk Tuah (hawktuuah.com), is outside the regulatory authority of the U.S. Securities & Exchange Commission22 and has been labeled an outright pump and dump scheme subject to greater fool theory.23
The push for mainstream acceptance and risk taking by investors has amplified the potential systemic risk that cryptocurrencies pose to financial markets. Over the last decade, politicians, lobbyists, and ETFs have continued to urge for more mainstream acceptance of cryptocurrencies. In the 2024 election cycle, cryptocurrency super PACs spent $131 million to elect pro-cryptocurrency policymakers.24 Greater public approval has led to greater risk-taking by investors. And the lack of regulation in decentralized finance has led to high rates of leverage among investors in cryptocurrencies such as Bitcoin. The high use of leverage has further exacerbated volatility and procyclicality in cryptocurrency markets.25
Ponzi Schemes?
Though touted as a long-term store of value by proponents, many economists and financial authorities assert that cryptocurrencies exhibit characteristics traditionally associated with Ponzi schemes.26 Earlier investors earn profits from their investment by selling to newer investors.27 Because cryptocurrencies like Bitcoin do not increase the productive potential of the economy, their continued increase in value is redistributive.28 The increased consumption and real wealth of early investors in Bitcoin comes at the expense of the consumption and real wealth of later investors or non-investors. In operation, traditional Ponzi schemes are zero-sum games, where current investor gains must be balanced by the eventual losses of future investors (Net Loss = Net Gain). Worse still, many cryptocurrencies are negative-sum games where the total loss to investors, in addition to overriding energy and environmental costs, outweighs any potential gains (Net Loss > Net Gain).
Are Cryptocurrencies Environmentally Sustainable?
Cryptocurrencies like Bitcoin must be electronically mined with powerful computers to validate transactions on the blockchain ledger.29 The mining process requires large amounts of electricity and water to power and cool the requisite computing hardware. Every year in the United States, cryptocurrency mining is estimated to release between 25 to 50 million tons of carbon dioxide.30 The mining of Bitcoin alone is believed to compose 0.5 – 0.6% of global electricity consumption.31 Compared against countries, the annual energy consumption of the Bitcoin industry alone would rank 27th, greater than the energy consumption of Poland, Egypt, and Malaysia.32 Bitcoin is also heavily reliant on fossil fuels drawing on coal and natural gas for two-thirds of its energy supply.33
Though cryptocurrencies represent less than 0.5% of the global financial transactions, their environmental impact is exponentially greater. As of 2021, the total electricity consumption of cryptocurrencies is estimated to be nearly double that of the conventional financial transaction system34 and the total water footprint of cryptocurrencies is estimated to be more than double.35 Cashless transactions via credit cards are considered to be many times less carbon and energy intensive than cryptocurrency transactions.36 In a world grappling with climate change and resource scarcity, cryptocurrency’s heavy environmental footprint seriously calls into question its future viability.
Monetary Policy & the Prominence of the Dollar
The dollar’s ascension as the world’s reserve currency in the aftermath of World War II and the Bretton Woods Conference is one of the leading catalysts that transformed America into a global superpower. Like the silver that flowed into Rome’s coffers after its defeat of Carthage and capture of Iberian silver mines in the Second Punic War, the prominence of the dollar has allowed America to expand its influence reaching across Europe, the Mediterranean, the Americas, Asia, and the Pacific. Approximately half of all global trade is transacted in U.S. dollars and 57% of the world’s currency reserves are denominated in U.S. dollars.37
If a country’s ability to control a monopoly on the supply of money is a catalyst that transforms nations to empires, the decentralization of the money supply is likely to have a chilling effect. Anything that could threaten the dollar’s status as the global reserve currency jeopardizes America’s standing as the global superpower. If more financial transactions move from settlement in U.S. dollars to settlement in cryptocurrencies, the dollar will lose prominence, the U.S. financial system will lose transaction volume, and U.S. hegemony will wane. By embracing cryptocurrencies, sovereigns are essentially embracing alternatives to sovereign fiat currencies and threatening the dollar’s standing as the world’s reserve currency.38 Widespread adoption of cryptocurrencies could also impair the ability of central banks to conduct monetary policy through control of the money supply39 thereby amplifying systemic risk across financial markets.
Therefore
Cryptocurrencies, like Bitcoin, are not money. They are not gold. And they do not possess characteristics of traditional financial investments. Cryptocurrencies are speculative assets that carry huge environmental footprints. They pose high financial risks to investors and high probability of financial collapse. Their expanded use risks displacing the dollar’s status as the global reserve currency and impacting the Federal Reserve’s ability to implement effective monetary policy and mitigate systemic risk.
Despite the rhetoric of prominent politicians, corporations, and lobbyists calling for the mainstream acceptance of cryptocurrencies, anything that threatens the dollar’s standing as the global reserve currency is bad for America. The push toward legitimizing decentralized, unregulated, energy-intensive, speculative assets at the expense of the dollar is foolhardy. Available data and leading economic authorities suggest that, rather than the next branch in the future evolution of money, cryptocurrencies are an evolutionary dead end with a high probability of fostering financial collapse.
