3 Takeaways - Hype vs. Reality: How Crypto Became a $4 Trillion Roller-Coaster (#259)

Episode Date: July 22, 2025

Crypto runs on stablecoins — and they’re far less stable than they sound.Bloomberg investigative journalist Zeke Faux followed the money behind the scenes. What he uncovered will change the way you see digital money — and the trust it’s built on.Listen to understand the hidden forces shaping the future of money.

Cryptocurrencies have gone from internet curiosity to trillion dollar valuations. But what's hype? What's real? And what's coming next? Hi everyone, I'm Lynne Toman and this is 3 Takeaways. On 3 Takeaways I talk with some of the world's best thinkers, business leaders, writers, politicians, newsmakers, and scientists. Each episode ends with three key takeaways to help us understand the world and maybe

even ourselves a little better. Today I'm excited to be with Zeke Fox. Zeke is an award-winning investigative journalist at Bloomberg and a national fellow at New America. He literally traveled the world to follow the money behind crypto currencies, chasing down elusive founders, exposing hidden players and uncovering what's real behind the crypto hype. He's the author of the very entertaining book, Number Go Up, which tracks crypto's rise. Today, I'm thrilled to go behind the headlines and find out what's real, what's hype, and what's next. Zeke, welcome and thanks so much for joining Three Takeaways

today. Thanks a lot, Lynn. It is my pleasure. Zeke, can you explain very briefly what Bitcoin is? You can think of Bitcoin as like a big spreadsheet in the sky. And it's got two columns. Column A is the names of the account holders, you know, like Lynn and Zeke. And in column B, it's how much each of us has.

So maybe you've got five and I've got 10. And those numbers represent how many bitcoins we have. That's basically it. When you pay $100,000 for a Bitcoin, you are just paying for that number on your line in the spreadsheet to be increased by one. There's nothing else. And instead of having your actual name in that spreadsheet, you're represented by a long

string of random letters and numbers. That's what makes it semi-anonymous. And what was the original vision behind Bitcoin and how has that changed? Originally, Bitcoin proponents thought that Bitcoin would be like an alternative to the dollar and we would use it to conduct everyday transactions free from fees charged by financial middlemen or government surveillance. Now Bitcoin's been around for 15 years. It's as old as Uber, it's as old as WhatsApp. But pretty much no one uses it for that.

Instead, people buy Bitcoin because they want to make money. They want to see the price go up even more. And for the last couple of years, that's what's been happening. So the price of Bitcoin was basically zero for many years until something shifted. What happened and who were the early adopters? At first it was kind of a fun thing for nerdy hobbyists. The first real consumer application was a dark web drug marketplace called Silk Road and

this was a website that worked kind of like Craigslist but dark web just means you can only access it from a special browser and you could order all kinds of drugs and other things to be delivered to your home and the dealers that were on this marketplace accepted payment in Bitcoin. The prospect of ordering drugs with home delivery was enough to get a lot of otherwise uninterested people to give this Bitcoin thing a try and Because there was new demand for Bitcoin to use this website the price started going up Interestingly the guy behind Silk Road Ross Albright who was eventually caught and sentenced to prison

became kind of a cause celeb in Bitcoin circles and was recently pardoned and freed from prison by President Trump after extensive lobbying by Bitcoiners who appreciate his early contributions to the industry. So interesting. I did not know that he was released from prison. We hear about Bitcoin and also about what are called stable coins like Tether. What's the difference? Of all these different cryptocurrencies, stable coins are kind of a special type.

And these are coins that are supposed to always be worth a dollar because each coin is backed by a real dollar held in a bank somewhere. So the idea is that you send in 100 bucks to the company Tether. They issue the biggest stable coin and then Tether will issue you 100 digital tokens, which you can then go and use in crypto land. Tether does not have any legal headquarters. It doesn't have any audited financial statements in any country. And yet it claims to have one hundred and fifty billion dollars that it's received. Yeah. In the last year or two, Tether has gained some powerful allies. Howard Lutnick, the head of Canterfitch Gerald, a well-known investment bank, he started vouching

for Tether and he said his bank had started to hold Tether's reserves and that he'd checked it out and the company had the money it claimed. He's now the Secretary of Commerce. And he owns a stake in Tether, like a small percentage of the company. So not quite an audited financial statement, but compared to where Tether started, it's definitely come a long way.

See, how big is this world now? Can you give a sense of the scale of Bitcoin and other digital currencies? The market capitalization of all cryptocurrencies put together is something like $3 trillion. That, I think, overstates the scale of the industry because of the ease of creating new currencies and having them have big market caps. I mean, the industry is big enough that last election cycle, it spent more on political donations than any other industry, like more than oil and gas.

But it's still, you know, tiny compared to the regular financial industry or the greater tech industry. So let's talk about the strategies used to make what you call number go up. First was paying famous people. So how did that strategy work and who did they pay? One of the best ways to make money in crypto is to launch your own cryptocurrency. And at this point, it's like trivially easy to do. The problem is that there's so many people doing it.

There's new ones every second. How is yours going to get any attention? So in some cases, the creators of the cryptocurrency will pay someone famous to endorse it as a way of getting more attention. And there's one example that I like from the early days back in 2017 where a bunch of hustlers from Florida like worked at a car dealership, created a new cryptocurrency called Centra and like claimed it was going to revolutionize banking or something. But the key part was they paid the boxing legend Floyd Mayweather to endorse it and they were able to sell 30 million dollars of centric coins.

It inevitably collapsed. The people who had bought it were angry and some of the people behind it ended up going to jail. Although not all of the executives because one of the executives they listed on their website was just a made up guy with a stock photo. So he was safe from prosecution. The problem is that even crypto people will acknowledge this. They've really struggled to come up with a reason why regular people would want to use all of this stuff other than financial speculation. Number go up. Crypto has enabled whole new categories of fraud. What kinds of new frauds has it enabled?

And is it really as untraceable as people once thought? One that I found very disturbing has come to be known as pig butchering. And these are financial scams that, I mean, you may have interacted with them without even realizing it. It's these wrong number text messages that most of us get on the daily. They'll be like, hey, what's up, Daniel? Did you get the milk on your way home? If you interact with these people, they'll try to be your friend.

They'll eventually convince you that they're really good at investing in crypto and you should too. And they will try to get you to acquire stable coins and to send your stable coins to a crypto address, the idea is that this is going to be for some kind of investment, but in reality, you'll never see that money again. It may sound kind of ridiculous, but people are losing billions of dollars to these scams every year. And the worst part is that the people on the other end, the ones sending these text messages, are themselves often victims.

They are often from around Southeast Asia and they're lured to generally Cambodia or Myanmar with the offer of a really good job. When they get there, they're trapped, their passports are taken and they're forced to run these scams under threat of beatings or worse. The reason that crypto has made this possible is that, you know, if I fall victim to one of these scammers, I can send $100,000 instantly to a scammer who's working for a Chinese gangster in Cambodia. And there's no refunds. You know, when I realize I've been had and I've called the cops, they won't have any clues.

All they'll have to go off of is this 32-digit string of random letters and numbers that represents the scammers' crypto address. In September 2024, just after the election, the Trump sons began promoting something called World Liberty Financial. What is it? How does it work?

And who are the investors? Yeah, Trump Sr. too was promoting it. He did a live stream from Mar-a-Lago. During his first administration, Trump had called Bitcoin a scam. But last July, he actually appeared at one of these big crypto conferences and endorsed crypto. He said, we'll make the U.S. the crypto capital of the planet. And just a few weeks later, he and his son started promoting their own cryptocurrency called World Liberty Financial. Like a lot of things in crypto, it wasn't really clear exactly what it was or what it would do. But there was a coin.

And would you like to buy some? And they ended up selling five hundred50 million worth of World Liberty tokens. Three quarters of all the money that World Liberty takes in from whatever business it does, and also from token sales, goes right to the Trumps. So they've made like $400 million in profit from it already. And the biggest investor that we know of in World Liberty is a crypto billionaire named Justin Sun. He runs a blockchain called Tron. Under the Biden administration, Sun had been sued for fraud in relation to the creation of his Tron token.

So Sun bought $75 million worth of these World Liberty tokens. And subsequently, the fraud lawsuit was put on hold by the Trump administration. Wow. What do you see next in crypto, Zeke? Under Biden, it wasn't just Justin Sun. So many of the biggest players in crypto got sued and the allegations boiled down to you are illegally marketing investments without following our age old system of financial regulation. And under Trump, that's totally changed. All the lawsuits have been dropped and the leaders of the crypto industry have been invited to the White House to talk about how they'd like

financial regulations for crypto to look. So at this point, it seems like the regulations for crypto might be so favorable that it might be in your interest to become a crypto company just to take advantage of the looser rules. It's been reported recently that Walmart, Amazon, Facebook and X or Twitter have all been considering getting into the stablecoin business. So it seems likely that we'll see more and more people issuing cryptocurrencies because it's a cheaper way to raise money. You don't have to follow all the same paperwork requirements that you would if you were doing an initial public offering of stock. Exactly. They don't have to follow the banking rules or any of the financial regulations

or protections for investors. Zeke, before I ask for the three takeaways you'd like to leave the audience with today, is there anything else that surprised you and your investigative reporting on crypto? When I think about crypto, I often think about one interaction I had at a conference hosted by Sam Bankman Fried at sort of the peak of the last boom in the Bahamas. And I was talking with a guy who made a crypto video game. He said it was about spaceships. He'd sold already $300 million worth of crypto spaceships to people who wanted to play the game.

I was pretty impressed. I said, okay, cool. Let's try this game out. Let's play. I want to, you know, I'm a writer. I want to see how it works so I can write about it. And he was like, whoa, whoa, whoa there. The game doesn't actually exist.

We just sold the spaceships. But like, you can earn interest on your spaceship if you deposit it in this lending protocol. And I'm like, oh, I see. And I just felt like that's so much of crypto is like these non-existent spaceship games. Wow. Zeke, what are the three takeaways you'd like to leave the audience with today? First one is if something seems too good to be true in the world of investing, if the

person promoting it can't explain what it is properly, trust your instinct. Maybe it is too good to be true. Second one is in all this investigating crypto, I've gained a new respect for our 100 year old system of financial regulation in the US. The rules that require companies to disclose things like who their CEO really is or how much money they made last year. That's actually helped create vibrant capital markets here in the US. Investors trust that the companies are generally honest, even though you can find, you know, millions of counter examples. I'd be hesitant to toss that all out and have us run new unregulated crypto markets. The third one is my initial skepticism of crypto as a field of inquiry was wrong.

In fact, if you are looking for crazy characters to write about as I always am, a world where you can make up digital tokens and become a billionaire overnight is perfect. Zeke, thank you. I really enjoyed your book, Number Go Up. Zeeke Thanks a lot, Lynn. Lynn Farrow If you're enjoying the podcast, and I really hope you are, please review us on Apple Podcasts or Spotify or wherever you get your podcasts. It really helps get the word out. If you're interested, you can also sign up for the Three

Takeaways newsletter at ThreeTakeAways.com, where you can also sign up for the Three Takeaways newsletter at ThreeTakeaways.com, where you can also listen to previous episodes. You can also follow us on LinkedIn, X, Instagram, and Facebook. I'm Lynne Toman, and this is Three Takeaways. Thanks for listening.