Crypto’s emptiness is paradoxically its strength

Following up on yesterday’s post on SBF’s Excellent Crypto Adventure, Andrew Gelman points out how, precisely because there’s no there there, crypto scams are less vulnerable to debunking than scams based on fraudulent scientific claims:

There were lots of reasons for respected journalists or financial figures to promote crypto, including political ideology, historical analogies financial interest, FOMO, bandwagon-following, contrarianism, and plain old differences of opinion . . . pretty much the same set of reasons for respected journalists or financial figures to have been crypto-skeptical!

My point here is not that I knew better than the crypto promoters—yes, I was crypto-skeptical but not out of any special knowledge—; rather, it’s that the infrastructure of elite journalism was, I think, crucial to keeping the bubble afloat. Sure, crypto had lots of potential just from rich guys selling to each other and throwing venture capital at it, and suckers watching Alex Jones or whatever investing their life savings, but elite media promotion took it to the next level.

It’s not like I have any answers to this one. There were skeptical media all along, and I can’t really fault the media for spotting a trend that was popular among richies and covering it.

I’m just interested in these sorts of conceptual bubbles, whether they be financial scams or bad science (ovulation and voting, beauty and sex ratio, ESP, himmicanes, nudges, UFOs, etc etc etc), and how they can stay afloat in Wiley E. Coyote fashion long after they’ve been exposed.

Crypto is different from Theranos or embodied cognition, I guess, in that it has no inherent value and thus can retain value purely as part of a Keynesian beauty context, whereas frauds or errors that make actual scientific or technological claims can ultimately be refuted. Paradoxically, crypto’s lack of value—actually, its negative value, given its high energy costs—can make it a more plausible investment than businesses or ideas that could potentially do something useful if their claims were in fact true.

At bottom, there’s a kind of epistemological nihilism at the base of the rampant financialization of the economy — the process by which making money becomes somehow detached from any socially useful means of production — of which “the crypto space” is merely a particularly extreme example.