“The countdown clock on the next catastrophic crash has already started,” Dennis Kelleher, the president of the nonprofit Better Markets, told me.In the past few weeks, I have heard that sentiment or similar from economists, traders, Hill staffers, and government officials. The incoming Trump administration has promised to pass crypto-friendly regulations, and is likely to loosen strictures on Wall Street institutions as well.This will bring an unheralded era of American prosperity, it argues, maintaining the country’s position as the head of the global capital markets and the heart of the global investment ecosystem. “My vision is for an America that dominates the future,” Donald Trump told a bitcoin conference in July. “I’m laying out my plan to ensure that the United States will be the crypto capital of the planet and the bitcoin superpower of the world.”Financial experts expect something different. First, a boom. A big boom, maybe, with the price of bitcoin, ether, and other cryptocurrencies climbing; financial firms raking in profits; and American investors awash in newfound wealth. Second, a bust. A big bust, maybe, with firms collapsing, the government being called in to steady the markets, and plenty of Americans suffering from foreclosures and bankruptcies.Having written about bitcoin for more than a decade—and having covered the last financial crisis and its long hangover—I have some sense of what might cause that boom and bust. Crypto assets tend to be exceedingly volatile, much more so than real estate, commodities, stocks, and bonds. Egged on by Washington, more Americans will invest in crypto. Prices will go up as cash floods in. Individuals and institutions will get wiped out when prices drop, as they inevitably will.The experts I spoke with did not counter that narrative. But if that’s all that happens, they told me, the United States and the world should count themselves lucky. The danger is not just that crypto-friendly regulation will expose millions of Americans to scams and volatility. The danger is that it will lead to an increase in leverage across the whole of the financial system. It will foster opacity, making it harder for investors to determine the riskiness of and assign prices to financial products. And it will do so at the same time as the Trump administration cuts regulations and regulators.Crypto will become more widespread. And the conventional financial markets will come to look more like the crypto markets—wilder, less transparent, and more unpredictable, with trillion-dollar consequences extending years into the future.“I have this worry that the next three or four years will look pretty good,” Eswar Prasad, an economist at Cornell and a former International Monetary Fund official, told me. “It’s what comes after, when we have to pick up the pieces from all the speculative frenzies that are going to be generated because of this administration’s actions.”For years, Washington h
