On Cryptofreude: Why Financial Insiders Delight in Deriding Cryptocurrencies


On February 3, 2018, economist and The New York Times columnist Paul Krugman tweeted “I am surely not the only person experiencing a fair bit of cryptofreude — pleasure in watching the Bitcoin etc bubble deflate. Bitcoin cultists tend, after all, to be nasty as well as crazy; not all of them, but surely above the average 1/”.[1] The “1/” indicates that Krugman was penning a series of tweets, which ended with “The point is that even though bubbles are, in effect, natural Ponzi phenomena, they don’t end as cleanly and suddenly as deliberate Ponzi schemes. To realize the full joy of cryptofreude, you need to be a bit patient 6/[.]”[2] Krugman’s tweet echoes the sentiments of other long-term market-watchers who delighted in Bitcoin’s rapid drop in value.

At the time, Bitcoin was seemingly in free fall, having dropped 64% below its record high.[3] Only a few weeks earlier, billionaire investor and Berkshire Hathaway CEO and Chairman, Warren Buffet, told CNBC “In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending.”[4] “When it happens or how or anything else, I don’t know,” added Buffet.[5] “If I could buy a five-year put on every one of the cryptocurrencies, I’d be glad to do it but I would never short a dime’s worth.”[6] Select All, New York Media’s technology vertical, published “The Bitcoin Subreddit During the Cryptocrash Is a Lot of Fun[.]”[7], which gleefully chronicled the Reddit posts of Bitcoin acolytes during the downturn.[8] The heads of central banks, investment banks, and even the Prime Minister of England have expressed dour opinions about cryptocurrencies.[9]

So why are some investors, economists, and other market-watchers taking potshots at cryptocurrencies—sometimes with unconcealed delight? For many of the old-hand financiers “cryptofreude” comes from an acute knowledge of financial history and the desire to express just how correct their predictions were to those who did not take heed. JPMorgan CEO Jamie Dimon has called cryptocurrencies “worse than tulip bulbs,”[10] referencing the seventeenth-century Tulip mania market bubble.[11] “Don’t ask me to short it. It could be at $20,000 before this happens, but it will eventually blow up,” said Dimon last year during a New York conference.[12] “Honestly, I am just shocked that anyone can’t see it for what it is.”[13] Joseph Stiglitz, a Nobel Prize-winning economist called Bitcoin “a bubble that’s going to give a lot of people a lot of exciting times as it rides up and then goes down.”[14]

Krugman himself, during the Twitter thread in which he likely coined the term “cryptofreude,” compared the Bitcoin bubble to the tech bubble of the early 2000s.[15] “What we see [with Bitcoin]is a series of plunges followed by partial recoveries,”[16] tweeted Krugman. “It’s worth noting, then, that you saw the same thing (in much slower motion) as the dotcom bubble burst.”[17] “Back then there was a reserve of true believers who kept buying the dips, sure that the market would eventually regain its faith in techno-magic. Some of the same thing presumably happening now. Plus there are probably market manipulators now, trying to support things 5/[,]”[18] Krugman continued. Krugman ended his thread by calling cryptocurrencies “Ponzi schemes[.]” Bank for International Settlements general manager Agustín Carstens repeated Krugman’s characterization only days later, calling Bitcoin “a bubble, a Ponzi scheme and an environmental disaster[.]”[19] “If authorities do not act preemptively, cryptocurrencies could become more interconnected with the main financial system and become a threat to financial stability,” he said in his February 6th speech at Frankfurt’s Goethe University.[20] Thus, for many seasoned market-watchers, cryptocurrencies are not just bubbles, they’re scams all together.

Even Jordan Belfort—yes, that Jordan Belfort—the real-life Wolf of Wall Street has warned against buying Bitcoin.[21] “I think it’s a huge danger right now that people are looking at this as the next great thing,” Belfort told CNN Money; “[i]t’s a bubble for sure.”[22] As for that bubble bursting? “It’s almost a guarantee.”[23]

Thus, it seems that for many old-school financiers, the cryptocurrency craze is just history repeating itself. For men like Buffet, Dimon, Stiglitz, Krugman, Carstens, and even Belfort, Bitcoin and its ilk are just another speculative bubble waiting to burst. They have ridden the market’s ups and downs for many decades, these financial veterans have reason to trust their instincts. Furthermore, Krugman and Carstens, men au fait with the inner-workings of the global economy, have called cryptocurrencies “Ponzi scheme[s.]”[24] Characterizations like these are not so far from reality; a number of cryptocurrencies have turned out to be “pump and dump” schemes and outright scams.[25] Disgruntled investors have filed a federal lawsuit against BitConnect, a Bitcoin lending platform, which many believe to be at best a pyramid scheme and at worst a Ponzi scheme.[26] A flurry of cryptocurrencies have been minted as of late, often for the purpose of financing Initial Coin Offerings (“ICOs”).[27] While some coins minted for these ICOs are used to fund legitimate companies, others are simply swindles.[28] Considering the lack of regulation, the litany of cryptocurrencies that are being minted, and the number of incidents of fraud, Krugman’s and Carstens’s misgivings may not be irrational.[29]

The cryptocurrency mania hasn’t cooled and, perhaps, these men feel as though their warnings against buying into a bubble that’s about to blow have fallen on deaf ears. Thus, if Krugman, Buffet and the rest are right about Bitcoin and their warnings go unheeded, their “I told you so’s” won’t be undeserved.

[1] Paul Krugman (@paulkrugman), Twitter (Feb. 3, 2018, 9:52 AM), https://twitter.com/paulkrugman/status/959801709794078720.

[2] Paul Krugman (@paulkrugman), Twitter (Feb. 3, 2018, 10:02 AM), https://twitter.com/paulkrugman/status/959804402231111680.

[3] Becky Peterson, ‘It Doesn’t Die and It Comes Back Stronger’: Bitcoin Believers are Digging in Amid the Crypto Bloodbath, Business Insider (Feb. 5, 2018, 8:39 PM), http://www.businessinsider.com/bitcoin-prices-fall-but-institutional-investors-hold-steady-2018-2.

[4] Berkeley Lovelace Jr., Buffett on Cryptocurrencies: ‘I Can Say Almost with Certainty that They Will Come to a Bad Ending’, CNBC (Jan. 10, 2018, 8:48 AM), https://www.cnbc.com/2018/01/10/buffett-says-cyrptocurrencies-will-almost-certainly-end-badly.html.

[5] Id.

[6] Id.

[7] Id.

[8] Jake Swearingen, The Bitcoin Subreddit During the Cryptocrash Is a Lot of Fun, Select All (Feb. 6, 2018, 5:41 PM), http://nymag.com/selectall/2018/02/the-bitcoin-subreddit-during-the-cryptocrash-is-a-lot-of-fun.html.

[9] Julia Kollewe, Bitcoin: What Have Experts Said About the Cryptocurrency?, The Guardian (Feb. 8, 2018, 12:02 PM), https://www.theguardian.com/technology/2018/feb/08/bitcoin-what-the-experts-have-said.

[10] Angela Monaghan, Bitcoin is a Fraud that Will Blow Up, Says JP Morgan Boss, The Guardian (Sept. 13, 2017, 6:26 AM), https://www.theguardian.com/technology/2017/sep/13/bitcoin-fraud-jp-morgan-cryptocurrency-drug-dealers.

[11] Daniel Shane, Bitcoin vs History’s Biggest Bubbles: They Never End Well, CNN Money (Dec. 8, 2017, 11:46 AM), http://money.cnn.com/2017/12/08/investing/bitcoin-tulip-mania-bubbles-burst/index.html.

[12] Monaghan, supra note 10.

[13] Id.

[14] Kevin Costelloe, Bitcoin ‘Ought to Be Outlawed,’ Nobel Prize Winner Stiglitz Says, Bloomberg (Nov. 29, 2017, 7:27 AM), https://www.bloomberg.com/news/articles/2017-11-29/bitcoin-ought-to-be-outlawed-nobel-prize-winner-stiglitz-says-jal10hxd.

[15] Paul Krugman (@paulkrugman), Twitter (Feb. 3, 2018, 9:57 AM), https://twitter.com/paulkrugman/status/959803029938728960.

[16] Paul Krugman (@paulkrugman), Twitter (Feb. 3, 2018, 9:56 AM), https://twitter.com/paulkrugman/status/959802675457134592.

[17] Krugman, supra note 18.

[18] Paul Krugman (@paulkrugman), Twitter (Feb. 3, 2018, 9:59 AM), https://twitter.com/paulkrugman/status/959803607448211457.

[19] Agustín Carstens, Speech at the House of Finance, Goethe University, Frankfurt (Feb. 6, 2018) (transcript available at Bank of International Settlements).

[20] Id.

[21] Ruth Umoh, Real ‘Wolf of Wall Street’ Slams Bitcoin Again: It’s a ‘Huge Danger’ and a ‘Bubble’, CNBC (Dec. 19, 2017, 2:10 PM), https://www.cnbc.com/2017/12/19/real-wolf-of-wall-street-calls-bitcoin-a-huge-danger.html.

[22] Id.

[23] Id.

[24] Krugman supra note 2; Carstens supra note 19.

[25] Olivia Solon, Bitcoin, Titcoin, Ponzicoin: Jokes and Scams Fuel a Cryptocurrency Gold Rush, The Guardian (Feb. 2, 2018, 3:00 AM), https://www.theguardian.com/technology/2018/feb/02/bitcoin-bananacoin-prodeum-cryptocurrencies

[26] Olga Kharif & Rob Urban, These Crypto Investors Want Revenge on the Scammers Who Ripped Them Off, Bloomberg (Feb. 13, 2018, 6:00 AM), https://www.bloomberg.com/news/articles/2018-02-13/crypto-con-victims-offer-bounty-on-people-they-say-swindled-them.

[27] Solon supra note 25.

[28] Kharif & Urban supra note 26.

[29] Solon supra note 25.


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Fordham Journal of Corporate & Financial Law