Capitalism Devours Crypto

… by blowing up and looting DeFi to enrich TradFi

Readers may puzzle over this cartoon and its relationship to Crypto. It is taken from the British artist William Hogarth’s famous work of 1721: The South Sea Bubble, as I explain in my forthcoming book - The Global Casino: How Wall St Gambles with People and Planet. For more, see the addendum below.

The Global Crypto Bubble

Crypto - the criminal currency promoted by libertarians of a pioneering, frontier spirit - is being looted by the age-old criminality of capitalism - even while its global valuation rockets to $4 trillion; and even as it is clothed in the respectability of US Congressional and Presidential approval, with cover promised by US regulatory institutions.

One of the gangster bosses looting the decentralised system (DeFi) is none other than the President of the United States. As Bloomberg reported on 21 July, 2025

Trump Media & Technology Group Corp., the firm behind Truth Social, has acquired about $2 billion in Bitcoin and related securities as part of its previously announced plan to become a crypto treasury company.

Bear that phrase in mind: “a crypto treasury company” as I walk you through the process whereby libertarian, de-regulated crypto has met its nemesis: rampant, and corrupt financialised capitalism. In short, Wall Street and the White House.

It all began with Stablecoins

…. like Tether and USD Coin, which like so much about crypto, are not coins. Instead they are the digital currency used in a discredited Hayekian and unregulated system known as ’narrow banking’ or full reserve banking. As Gary B Gorton and Jeffery Y. Zhang argue in an excellent paper Taming Wildcat Stablecoins Stablecoins have no intrinsic value. Instead, like the unregulated banks of old, they are currency used by platforms to facilitate exchanges and like banks manage transactions between different cryptocurrency buyers and sellers and between crypto buyers and sellers of US dollars. (There are now more than 15 million different cryptocurrencies, according to price-tracking website CoinMarketCap). To facilitate those transactions Stablecoin platforms issue a form of ‘fiat currency’ (the Stablecoin) which is new, private money creation.

Owners of Stablecoins can “pledge them in decentralised finance (DeFi) platforms that (allegedly) provide interest rates that far exceed the yield that retail investors can obtain” via TradFi (Traditional Finance) - like a bank savings account” write Gorton and Zhang.

Are Stablecoins stable?

Their claim to be stable, and therefore reliable for those wishing to exchange their cryptocurrency for another cryptocurrency or for US dollars, is based on the assertion that Stablecoin’s value does not deviate from the assets they hold; assets that back up the currency. Those assets (or collateral) are mainly short-term US Treasuries, or US government debt.

Back in the 1830s in the United States, unregulated ‘narrow’ banks issued bank notes and arranged transactions in much the same way as Stablecoin platforms do today. In exercising the power to create new money, they would claim falsely, that all the banknotes issued were fully backed by gold stacked in their vaults, or in the vaults of partner banks.The implication was that the notes could be exchanged for gold. Only in a downturn when suspicious customers checked, panicked and caused a run on the bank, were those falsehoods revealed.

Like the US banks of the 1830s, the unregulated Stablecoin ‘bank’ is not backed by gold, but by its holdings of valuable assets that can, it is alleged, be exchanged at par. In other words, the owner of a Stablecoin can allegedly, and at any time, swap the digital ‘coin’ for the exact value of a safer, equally valuable US Treasury bill. This makes a Stablecoin distinct from volatile cryptocurrencies like Bitcoin that are not backed by assets, and whose prices are highly volatile.

Finally, in resembling the ‘narrow banks’ of the 1830s, Stablecoins too are susceptible to downturns, suspicion, panics and bank runs.

There are reasons for investors to worry. Short-term US Treasuries (bonds) that back Stablecoins are just that: promises to pay back quickly, with interest. A maturing bond could lead to the evaporation of the currency’s chosen collateral. Similarly, cuts in the issuance of US government debt (borrowing) can lead to shortages of short-term Treasury bills. That in turn would cause concern amongst Stablecoin investors, and could threaten a run on the ‘bank’ as investors test whether their Stablecoin really can be exchanged at par.

To help avoid such lack of confidence, Stablecoins have sought the protection of the US Congressional legislature, and of US institutions. And in providing the imprimatur of regulation, the US Congress has helped to fire up the valuation of global crypto assets to an extraordinary $4 trillion.

Could that be a bubble?

The Stablecoin exchange system had seemed to be working well, with the most trusted platform owners regularly providing monthly accounting reports and audits of their assets. The market capitalisation of the best known, Tether, was $4.6bn in February 2020 and today is valued at a whopping $160bn, according to CoinLore. Backed by large technology companies and Wall Street banks, Stablecoins have “potential for even greater adoptions” argue Gorton and Zhang.

That is why what happened next is a puzzle: Stablecoin owners demanded to be regulated which led to the drafting of the GENIUS (The Guiding and Establishing National Innovation for U.S. Stablecoins) Act.

Pushed by the Crypto sector, and ushered in by the American Presidency the Act won the bipartisan support of both US Congressional Republicans and Democrats. The passage of the Act was initially purchased during the Trump presidential campaign. Thanks to generous crypto donations to US politicians, and to the defeat of crypto-sceptics like Democrat Senator Sherrod Brown, passage of the GENIUS Act was assured. One of the co-sponsors of the Act is the New York (for which read Wall Street) Democrat Senator, Kirsten Gillibrand.

In the week of its adoption President Trump held a gala dinner at the White House to celebrate its passing. The top 220 holders of the $Trump memecoin competed (by buying more memecoins) to be invited to the dinner. Trump had reason to celebrate. The adoption of the GENIUS Act by the US Congress fuelled the rise in valuations of cryptocurrencies held by his company, enriching the president and his sons. Together they are joint owners of a Stablecoin through their cryptocurrency company, World Liberty Financial. (You gotta love the way in which the word ‘liberty’ is put to service here.)

According to CoinTelegraph the structure of World Liberty Financial

leans suspiciously centralized for a project that claims to be decentralized, and it has a governance token that holders can’t trade and a revenue model that funnels 75% of net profits to a Trump-affiliated entity.

It’s enough to make a crypto-sceptic cry….

DeFi clashes with TradFi

Crypto interests wanted to integrate Stablecoins into the regulated US financial system so that crypto assets and bank accounts could in future be protected by the Securities and Exchange Commission and the Federal Deposit Insurance Corporation, just as ordinary bank deposits are. In other words, the crypto sector wanted to be protected from losses or failure (insolvency) by the US rules-based system sponsored by the American taxpayer.

With the passing of the GENIUS Act, Stablecoin interests achieved their goal.

But Financialised Capitalism - i.e. Wall Street - had a very different, and a far more devious motive for integrating digital Crypto ’narrow banks’ within the financial system.

That motive: nothing less than the subordination of DeFi to the financial interests of TradFI.

This is where ‘crypto treasury companies’ come into the picture. By first luring the global crypto community of fiery libertarians into the rules-based system governed by the GENIUS ACT, THE US Federal Reserve and US institutions, Wall Street helped to inflate the price of crypto currencies. . As a consequence, sky-rocketing crypto valuations have risen to what many consider are unsustainable levels.

But it was the third development that has proved momentous: the creation of a new corporate identity: the ‘crypto treasury company’. Like the deployment of the word ‘Liberty’ in Trump’s World Liberty Financial, the use of the word ‘treasury’ here adds a touch of kingly gravitas to this novel corporate construct.

‘Crypto Treasury Companies’ are designed to get rich by doing nothing except warehousing Bitcoin - an asset of no intrinsic value. Second, they finance their purchases of Bitcoin by luring naive investors into ’the treasury’ as shareholders and lenders of cheap money. The more are lured in, the more attractive the share price, and the more money can be raised for the acquisition and warehousing of even more Bitcoins.

Strategy: the richest crypto treasury company of them all

President Trump is a little late to this particular, and very bubbly form of acquisitive, greedy corporate capitalism. Crypto treasury companies are already well established and one is way ahead in the race to inflate the biggest bubble in Wall Street’s history.

That company is Strategy, previously MicroStrategy, and is led by one Michael Saylor.

Strategy bears an uncanny resemblance to a company at the heart of one of the biggest Ponzi schemes in history - the South Sea Company (about which more below).

As the FT reports,

Strategy now holds 553,555 bitcoins or 2.64 per cent of total supply, acquired at an average price of $68,459 apiece and currently worth over $53bn.

The company itself is valued at $90bn - well in excess of the value of Bitcoin assets it warehouses.

Strategy’s crypto treasury business model was succinctly explained by Craig Coben in the FT:

MicroStrategy sells shares and convertible bonds to buy bitcoin. The purchases help support bitcoin’s price, which lifts MicroStrategy’s stock price. Then MicroStrategy sells more shares and convertibles off the higher price to buy more bitcoin.

Wash, rinse, repeat.

Sky-high share prices are attracting a constant flow of new investors all keen to make quick capital gains from this giant and expanding Ponzi scheme. In a process not unlike the financial wheel of fortune depicted in Hogarth’s merry-go-round of 1721 (see below), the purchase of Strategy shares speeds up the speculative frenzy and in a positive feedback loop, further inflates the market capitalisation of the company.

At some point - who knows when - the spinning wheel will come to a violent halt.

The Subordination of DeFi to TradFi

Back in 2008 Satoshi’s legendary White Paper heralded a financial revolution. As Michael Kendall wrote on 17 July this year, Satoshi wanted to establish

..a digital currency that would compete with the dollar and provide an end run around the global fiat system. Defi, decentralized finance, will become the name of the game, while Tradfi, traditional finance, slowly, then with a boom, disappears as another historical anachronism. Bitcoin was a decentralized digital system that promised stable money and a permanent ledger transaction history that would revolutionize every aspect of financial life. All the world would have access to this new, revolutionary transaction currency free from government control.

That is not how the decentralised finance system has turned out. Kendall explains far more eloquently than I ever could that:

Everything Satoshi’s White Paper envisioned for Bitcoin no longer exists. All that remains is a non-sustainable, manipulated asset where speculative frenzy defines its valuation.

All manias end the same.

Even Beanie Babies.

It’s not different this time.

Ah, but it is.

This time the President of the United States has climbed aboard the spinning wheel driving ‘crypto treasury companies’ - and dragged hundreds of thousands of gullible MAGA investors along with him.

Addendum:

Hogarth illustrated the aftermath of a financial crisis known as the South Sea Bubble with this famous etching and engraving that satirised the greed that had led to the Bubble and subsequent, catastrophic crash.

In the year before, thousands of investors and brokers across Europe had embarked on a feverish bout of financial speculation in which vast sums of money were invested in fraudulent, nonexistent and highly risky trading ventures. ‘Both the rich and the less affluent were falling under the thrall of the alluring but fickle figure of Fortune’, wrote one commentator. In Hogarth’s print, the grossly mutilated figure of Fortune is shown in the foreground, blindfolded and pinned to a wheel…

her body hacked by a scythe-wielding devil, who throws hunks of her flesh to the crazed speculators below. Honesty and Honour are similarly unclothed and exposed. Self-Interest is scourged by the two-faced figure of Villainy. Meanwhile, the frantic whirl of speculation is allegorised by the merry-go-round that spins in the mid-distance … Another form of gambling is highlighted on a nearby balcony, where a procession of spinsters queue to take part in a raffle for lottery-winning husbands.

Hogarth did not pull his artistic punches.

He should be living now.

---

Addendum 2 I am relieved to report that the laborious process of fact-checking and reference-fixing the new book - The Global Casino - is now done.

It was almost, but not quite as painful as giving birth. Grateful thanks are due to my Verso copy-editors Mark Martin and Joy Hoppenot. The big chief at Verso, Leo Hollis, is now discussing the first Jacket proof with designers and we’re working on the summarising text. (Not easy). The manuscript has gone to the printers, and I am told proofs will return some time in August. It will then get a final once-over with a pen…and after that dispatched for final printing, and publication in January.

As dedicated and beloved readers I will ensure you get an early bite at the cherry…and alert you to the opening of the pre-order window….

^[i] Mark Hallett and Christine Riding, Hogarth. The South Sea Scheme c. 1721, Tate Publishing, 2007, p. 57.

^[ii] Ibid.