The crypto crash has come again. And it is as brutal as ever. In barely six weeks, more than $1.2tn has evaporated from cryptocurrencies’ market capitalisation. The sell-off has sent bitcoin back to levels last seen in April. The world’s largest cryptocurrency briefly fell below $90,000 this week, shedding almost a third of its value since its October peak.
The key to understanding crypto is that it has no “value” in any economic sense. It generates no income, commands no productive capacity and pays no dividends. Unlike state money, it is not backed by a tax base or a fiscal authority. What props up its price is not cashflow but expectation: the hope that someone else will validate today’s valuation tomorrow. When sentiment turns sour or people pull their money out, there is nothing to break cryptocurrencies’ fall. Prices don’t correct, they collapse. In 2023, MPs rightly said that cryptocurrency trading in the UK should be regulated as a form of gambling – a demand rejected by the then Tory government.
The volatility of cryptocurrencies is not accidental but structural. The Financial Times reported that investors pulled out of crypto because there was a shunning worldwide of speculative assets amid concerns about sky-high AI valuations and the path of US interest rates. But while the crash is global, Britain is uniquely vulnerable to its fallout. No other large economy has so thoroughly hollowed out social mobility while selling to its young the myth of entrepreneurial escape. No surprise then that Britons are more likely to have bought into crypto than their European counterparts.
Regulators warn that too many young people in Britain are turning to crypto, often borrowing to do so because they want to “win big”. The UK has become, in effect, a one-shot society – a place where stagnant wages and unaffordable housing leave millions clutching at any chance, however illusory, to escape. The US rapper Eminem captured this mentality in his hit Lose Yourself, which begins: “Look, if you had one shot, or one opportunity. To seize everything you ever wanted … would you capture it?” For a generation locked out of asset ownership, crypto is marketed as that “one moment”.
It is in may ways the clearest symbol of an economic system running out of road: a promise of freedom built on an asset class whose standing depends on decisions made in Washington. Cryptocurrencies rise and fall with the Nasdaq; the dollar system is their unseen plumbing; and their values are determined by the White House. But the current crisis has been viewed as an opportunity by the political right. They sell crypto to the masses as rebellious empowerment.
Having once dismissed bitcoin as “based on thin air”, Donald Trump now revels in his role as “crypto president”. Under Mr Trump, crypto has become a machinery of patronage, deregulation and self-enrichment that is unprecedented in modern US politics. Joe Biden’s attempts to regulate crypto businesses – which have provided routes for fraud and money laundering – have been eviscerated.
Those on the right of politics who want to be supplicants to Trumpian power, whether that is Argentina’s Javier Milei or Britain’s Nigel Farage, now embrace crypto aggressively. It lets them pose as the insurgent alternative to a “rigged” system – accepting donations in anonymous digital payments to prove the point – while sucking up to Mr Trump. Crypto is not the end of politics in money. It resembles nothing less than the latest way for the powerful to profit from the powerless.
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