The Great Crypto Reckoning: Time to Get Real About Pseudo-Assets
Once hailed as revolutionary digital gold, Bitcoin and other cryptocurrencies have spectacularly failed to deliver on their promises. As global economic uncertainty grows, these digital assets have proven to be anything but safe havens, instead amplifying risk in financial markets.
The Failed Promise of Digital Gold
When Donald Trump returned to the White House with strong crypto industry backing, proponents predicted Bitcoin would surge to at least $200,000 by 2025's end. Instead, the so-called "digital gold" fell by 6% in 2025 and currently trades 35% below its October peak. The $Trump and $Melania meme coins have collapsed by 95%.
Contrary to expectations, Bitcoin has moved inversely to traditional safe havens. Every time gold spiked in response to geopolitical tensions or trade conflicts over the past year, Bitcoin fell sharply. Rather than serving as a hedge against turmoil, cryptocurrencies have shown strong correlation with speculative stocks and other risky assets.
The Fundamental Flaws of Cryptocurrency
Calling Bitcoin or any crypto a "currency" has always been misleading. These digital tokens function neither as reliable units of account, scalable payment methods, nor stable stores of value. Even in El Salvador, where Bitcoin enjoys legal tender status, it accounts for less than 5% of transactions for goods and services.
Crypto doesn't even qualify as a genuine asset class, lacking income streams, practical functions, or real-world utility that characterize traditional assets like gold and silver. Seventeen years after Bitcoin's creation, the only significant crypto application remains stablecoins—essentially digital versions of conventional fiat money.
The Blockchain Illusion
Most so-called "blockchain" implementations are blockchain in name only. They typically feature:
- Private rather than public networks
- Centralized rather than decentralized control
- Permissioned rather than permissionless access
- Validation by trusted authenticators instead of decentralized agents
True decentralized finance will never achieve significant scale because no responsible government will permit complete anonymity in monetary transactions—such systems would benefit criminals, terrorists, tax evaders, and other illicit actors.
The Dangerous Experiment with Stablecoins
The Trump administration's Guiding and Establishing National Innovation for US Stable Coins (Genius) Act may well be remembered as the Reckless Act. This legislation sets the stage for a destructive free banking experiment reminiscent of 19th-century financial crises.
The law creates dangerous vulnerabilities:
- Stablecoins aren't regulated as narrow banks focused on payments and deposits
- They lack access to lender-of-last-resort facilities
- They operate without deposit insurance protections
This framework makes the system vulnerable to panic and bank runs if just a few institutions mismanage their holdings or place deposits in weak counterparties.
The Battle Over Banking's Future
The crypto industry's push to allow interest payments on stablecoins—either directly or through exchanges—threatens to undermine traditional banking. In fractional reserve systems, banks transform short-term deposits into longer-term loans, providing valuable semi-public goods. Short-term deposits typically don't pay interest because they function similarly to currency.
We now face a critical choice: either radically restructure our financial system to separate payments from credit creation, or prohibit stablecoins from paying interest to prevent bank disintermediation.
A Serious Stability Threat
JPMorgan Chase CEO Jamie Dimon has rightly raised alarms about the crypto industry's ambitions, while Coinbase's Brian Armstrong has dangerously dismissed these concerns. This represents more than just industry competition—it's a fundamental threat to financial stability that demands immediate attention from policymakers.
The future of money and payments will involve gradual evolution, not the revolutionary transformation promised by crypto advocates. Bitcoin's latest plunge further underscores the volatile, speculative nature of this pseudo-asset class that has consistently failed to deliver on its grand promises.
