The Dangers for Investors

The crypto ecosystem is seen by some as a world of innovation and by others as a world of scams. Professor Paul Krugman and CZ cover the dangers present in the cryptocurrency landscape and offer ways to protect yourself.

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Topics include: Enabling Illegal Activity • Pump and Dumps • High Risk Is Always High Return • There’s No Guarantee


[MUSIC PLAYING] - There are a relatively small number of investors who play a very dominant role in trading so it becomes entirely possible for a handful of big investors to manipulate the price. Because this is supposed to be a free, unregulated, no oppressive hand to the government realm, it leaves a wide open spaces for fraudsters. People say it's the Wild West although the Wild West was actually a much more regulated place than people think. - Many people think just because it's decentralized, it's completely the Wild West. That's not true. We've seen law enforcement putting people behind bars for bad activities. We need that to keep this industry clean and healthy. - Crypto is kind of astonishingly, for a, again, a sector that at its peak was about $2 trillion in assets, it's essentially unregulated. There are basically no rules. Anybody can create a coin. Anybody can create an asset that derives from the coin or is an asset that is claimed to be backed by other assets. And nobody has the legal authority to check the claims being made. Nobody has the legal authority to check out the bona fides of the people doing it, all of which creates, first of all, just plain the risk of people being defrauded, being offered something that is not what it's claimed to be. It's all this high tech but in a lot of ways you're replicating the kind of banking system the United States had before we established the Federal Reserve and, in fact, even before we had federally-issued paper money. Then you're opening up to all the risks that system had, the risks of fraudulent banks, the risks of contagious, cascading bank runs, and the risk of disruption of the real economy so that not just money is lost but that real productive economic activity gets disrupted because the money stops flowing freely. So we have been seeing, in the crypto space that, basically, people's assets being frozen, creating halts when the price crashes. I actually have a slightly mixed view on that. That doesn't happen to your bank account. At no point during any of the turmoil of the past 15 years have we seen people lose access to their money. We don't want to see that happen. On the other hand, if we go back further in history before the Federal Reserve was created in the United States, which was 1913, it was actually quite common for banks during bank runs to temporarily close their doors and freeze customers' assets. And it was a bad thing. So given where we are right now, I would say that those trading halts are a warning sign that maybe you, miss average citizens, should not be involved in this stuff. Crypto is being used on the black market, or actually various black markets. The classic example now is it's set the precedent of crypto being used for illegal stuff was Silk Road, is crypto being used to buy drugs, probably prostitution, other things. And people will find ways to do things that are against the law. But crypto can be an enabling mecha...

About the Instructor

Since Bitcoin’s launch in 2009, crypto has offered the hope of a stronger, more democratic financial system. And it’s raised plenty of questions as it continues to evolve. Now experts and skeptics at the center of the conversation are sharing a straightforward look at how this ecosystem is changing. Learn the basics, dive deep into the world of blockchain and Web3, and get the breakdown on what you need to know now.

Featured Masterclass Instructor

Chris Dixon, Changpeng “CZ” Zhao, Emilie Choi, and Paul Krugman

Get critical intel on the evolving landscape of crypto. Learn the basics—or dive deep into the issues—with noted experts and skeptics.

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