Is Crypto-asset Wealth Real?

Does over $1 trillion in crypto-assets (having no fundamental value and paying no interest, but trading freely) now held by Americans represent new wealth? In his brief June 2021 paper entitled “Bubble Wealth”, Bradford Cornell addresses the apparent paradox between the view of economic theory (no new wealth) and the fact that those holding crypto-assets can use them for consumption (yes new wealth). He defines “bubble wealth” as the difference between wealth convertible to future consumption (real assets) and perceived wealth (not founded on real assets). Using a simple numerical example involving bubble wealth creation and destruction, he concludes that: (more…)