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This paper shows that cryptocurrency markets are plagued by pump-and-dump manipulation. Unlike stock market manipulators, cryptocurrency manipulators openly declare their intentions to pump specific coins, rather than trying to deceive investors. Puzzlingly, people join in despite negative expected returns.

XRP's price had gradually surged from $0.27 on January 25 to $0.40 on the 30th, the momentum contributing to a narrative that it was going to boom, despite the fact that a legal fight between Ripple and the SEC is in a very nascent phase. A couple of hours before 8:30am ET on February 1, with confidence reaching fever pitch, XRP hit $0.7448. At that point, whales began to offload their XRP and the coin's value dropped over the course of the morning to as low as $0.38. On the stock markets, pump and dumps like this are a form of securities fraud-but no such regulations exist in the crypto space.

Robert McCauley, an economist at Boston University, wrote an op-ed stating, "Bitcoin is worse than a Madoff-style Ponzi scheme." His case? People buy bitcoin with the expectation of a profit. Because bitcoin is a "zero-coupon perpetual" rather than a "income-generating" digital asset, the only way to profit is to "cash out" to someone else - the salutary greater fool. Bitcoin is worse than your everyday pump-and-dump penny stocks for McCauley. If the economic project fails, it's not just zero-sum for investors who lose their money, but "negative-sum" for society because of bitcoin's steep power bill. However, he's off-base in stating that mining bitcoin "represents a real cost" for the world. It's simply not for any individual to decide what power switches to flip on or off in a free market, especially given that many people willingly enter into the economic arrangement of securing this largest of decentralized, digital monetary networks (sometimes profitably).