The crypto industry got everything it wanted. It’s still having a meltdown

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This was supposed to be the year cryptocurrency, a 16-year-old asset that promised to be the future of finance, came into its own.
The multi-trillion-dollar industry got just about everything on its wish list over the past year: a rush of new money from mainstream investors, industry-approved bipartisan legislation in Congress, a rubber-stamp regulatory apparatus, and, not least, the full-throated support of the president of the United States.
Despite that, crypto has had a rough ride, with bitcoin tumbling 30% from its peak in early October, a far steeper decline than the broader stock market.
One of the most prominent industry critics is the actor and author Ben McKenzie, who last week debuted his documentary, “Everyone Is Lying to You for Money,” at the New York documentary film festival DOC NYC. On Friday, I sat down (virtually) with McKenzie, who starred in TV shows such as “The OC” and “Gotham,” to talk about the market meltdown and his film’s well-timed New York premiere.
This conversation has been edited for length and clarity.
CNN: Given all of crypto’s institutional support, I’m curious why we’re still seeing all this volatility?
Ben McKenzie: I think there are a few potential reasons. The first is that the economy is slowing down. And if you think of crypto as an investment in essentially nothing, computer code, it serves as sort of a proxy for the most speculative part of the market. It’s like the canary in the coal mine —when crypto crashes severely, it may be a sign that the broader economy is dipping.
The other reason is that the rise in crypto prices was fueled by companies buying bitcoin as a corporate strategy — MicroStrategy (now called Strategy) being by far the most prominent. But things are turning south for the company, its stock (MSTR) is down about 40% for the month, and people are concerned that it might have to sell its bitcoin.
The other problem with crypto is that people take on huge amounts of leverage to further their crypto bets. And when the price goes down and the de-leveraging starts, things collapse just as fast as they went up, if not faster. And that’s what’s scary about right now, to me, is the numbers just get bigger and bigger. But the volatility doesn’t really go away.
CNN: You’ve been outspoken in your view that crypto is fundamentally a scam. What do you say to crypto boosters who say, well, despite the volatility if you’d invested at almost any point in the past 10 years, you’d be sitting on huge gains?
McKenzie: You’re saying that, if you got in early on this thing that I and others have called a Ponzi scheme, then you would have profited. To which I say, correct. Yes, well done. It’s not quite the point that advocates think they’re making.
At the end of the day, it still comes back to the thing I say all the time, which is crypto — because there’s no underlying asset — is a zero-sum game. At best, your win comes from somebody else’s loss.
There’s a moral component to this that gets way outside of what we’re talking about in terms of making money on an investment. The amount of crime that crypto facilitates is truly staggering. You’re talking about money laundering to the tune of billions of dollars, influence peddling, terrorist financing.
So is it worth it for some people to win and everyone else to lose? To me, the answer is no.
CNN: Looking at the horizon, what, if anything, is keeping you up at night about the trajectory we’re on with crypto?
McKenzie: I had a bad feeling when Trump embraced crypto last summer, and then a worse feeling when he was elected, and then I’ve honestly been shocked at how much grift is going on.
But I am in a slightly better place recently… His poll numbers are starting to tank. The market is starting to tank. The economy is starting to slow down. And you know, if you study other countries and other collapses of unpopular leaders, he may be in for a ride here.
CNN: You’ve been a crypto Cassandra for a few years now, and I’m wondering if you plan to stay in this lane or if you’re expanding into other areas of speculative market hype? In case it’s not obvious, I’m referring to AI… Is there an “Easy Money” Part 2 in the works?
McKenzie: I’m definitely tempted to swerve over to the AI lane, which is quite a lot wider at this point.
There’s a thing called the grift shift — it’s a time honored con-man tactic to sell someone on something that doesn’t quite work now, but in the future will be amazing. That’s worked for crypto, and that is certainly the pitch for AI. I will say, I’m not a proponent of where AI is heading per se, but in AI’s limited defense, there’s an actual thing that’s happening that actually has a function in the real world that isn’t gambling and crime.