The post Crypto doesn’t have to be a market for lemons appeared on BitcoinEthereumNews.com.

This is a segment from The Breakdown newsletter. To read full editions, subscribe. “The bad cars tend to drive out the good.” — George Akerlof In his 1970 paper “The Market for Lemons,” economist George Akerlof explained what happens when sellers have more information than buyers. In the market for used cars, for example, the odds you’ll get a lemon are disproportionately high due to an “asymmetry in available information.” Because buyers can’t tell good cars from bad ones, they end up trading at the same price — a price that’s too low for a good car and too high for a bad one. Owners of bad cars, knowing what they have, are therefore incentivized to sell (usually to buyers who can only guess what they’re buying.)  This floods the market with lemons. “Gresham’s law has made a modified reappearance,” Akerlof warned. “For most cars traded will be the ‘lemons,’ and good cars might not trade at all.” The result is lower quality for buyers and a market that slowly eats itself. “It is quite possible,” Akerlof wrote, “to have the bad driving out the not-so-bad driving out the medium driving out the not-so-good driving out the good in such a sequence of events that no market exists at all.” This may be where crypto is heading, too: “ Liquid token investors are concerned that tokens are becoming a lemon market,” Felipe Montealegre told the Empire podcast this morning. That might seem surprising, given that blockchains are inherently transparent, but that doesn’t mean there’s nothing for crypto projects to disclose. One argument against regulating tokens has always been that there’s nothing to regulate; regulation is primarily about disclosure and in crypto, everything you’d need to know about a fully decentralized project is theoretically disclosed onchain. But few projects are fully decentralized. For…

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Filed under: News - @ June 18, 2025 10:24 pm