Too Much Crypto – An Input-Output Analysis

Abstract

The “too much finance” literature has shown that financial sector expansion can detract from economic growth and productivity when resources are misallocated toward privately profitable but socially unproductive activities. This paper applies this framework to cryptocurrencies, a rapidly growing segment of finance whose production structure consumes large quantities of energy. We present the first systematic application of Input-Output methodology to the U.S. cryptocurrency sector, constructing estimates of gross output and intermediate consumption for mining and centralized exchange operations over 2022–2024, and benchmarking these against 173 industries in the Bureau of Economic Analysis (BEA) Input-Output Use Table. We find that the cryptocurrency sector generates gross output comparable in scale to niche sectors of the U.S. economy, while consuming energy at a rate that is strikingly disproportionate to its economic contribution – the largest deviation among all U.S. industries. Its input structure is dominated by a single commodity – energy – leaving little room for inputs that generate productivity gains, and its outputs serve as productive inputs in virtually no other sector of the economy. Together these findings are consistent with a “too much crypto” hypothesis: the sector draws heavily on scarce resources while generating minimal economic output and productive spillovers.