‘The casino beckons’: my journey inside the cryptosphere

At first I felt a little dirty, a little shameful. Everyone is in these spaces for one reason: to make money. It's a subject that remains uncouth to speak about in my wider professional and social milieu. Soon, though, my shame started to interest me. I stayed a little longer, thumbing through channels on the subway or in bed late at night. It's a kind of rubbernecking only the internet allows, providing near-full access to a subculture to which you don't belong.

The more time I spent in the cryptosphere, the more I came to see it as a place where all our economic ills are refracted.

When I started thinking about crypto, in late summer 2021, I came to the discourse with a set of preconceptions about what I would find. The lofty vision of a transparent and fair financial system had mostly given way to the public worship of the appetites. Talk about crypto's "radical potential", whatever the politics, had been replaced by a caricature of Silicon Valley hype men and gym rats who liked to pose in front of Italian luxury sports cars and post closeups of their Rolexes. (A good day in crypto can equal a year's worth of returns on the stock market.) Most of what I'd gleaned about this part of the cryptosphere I had absorbed ambiently from the internet or the news.

I quickly came to understand that cryptocurrency is a term no longer precise enough to describe the array of projects under its umbrella. It's more than Bitcoin and ether and the occasional meme coin: it's thousands of projects with corresponding tokens, most of them unrelated to the ambition of replacing the US dollar as the world's reserve currency. In simplified terms, each project is built on a blockchain, what the cryptosphere calls a "settlement layer" or "layer 1." Ethereum is a layer 1; so are Terra, Avalanche, Solana and Cosmos, among others. Each layer 1 has its own native currency or token, which is used to pay for conducting transactions in its ecosystem. There are two main ways to access these tokens: on centralised exchanges, like the ones day traders use for foreign exchange or stocks, or on the blockchain itself, using a decentralised exchange.

Every token has its own "community" of loyal holders who congregate in project-specific Discord or Telegram channels to talk about the road map, to ask questions, or, as often happens, to complain about the price ("Why is price going down? Any news?"). Admins serve as the bridge between the project team and the community and share updates. For some projects, community support can resemble something like religious faith, insofar as the devotion on display seems incommensurate with the project's outputs. Imagine an Amazon-run Telegram channel where thousands of Amazon stockholders gather to make friends, cheer on the launch of a new service, or squawk at company reps when they aren't responsive enough. You can't. It would never happen. But it happens here, in crypto.

I looked around these online spaces and found that every token, every project, was at the mercy of the hype cycle, or what people in the cryptosphere genteelly call "narratives". Use value was merely incidental. The hype for the final third of 2021 hinged largely on NFTs; on projects with even a remote connection to the words "metaverse" and "gaming"; on layer 1s; and on a series of community-owned decentralised finance applications, known as DeFi 2.0. Apart from trading, the main strategy people rely on to make money is to identify the newest hype, get in early, and then pivot to the next, ahead of the herd. If you study the charts, you can pretty much watch the money move en masse from one speculative focus to the next.

"I have only $100 to put in. My wife stays home with our baby and I work full time and do delivery apps on weekends to make extra."

"I had constant stress about my investments but today all of it went away. Saw 3 people die, 2 of them were my close friends and [I] made it out safely after i got shot at 4 times. I was busy trying to make money, never would have thought things could go this wrong. Appreciate life and spend time with family and friends."

"I'm 17. If I stay here in my country after uni and work I can earn maybe $100 a week max."

"Can't wait to tell my manager to eat shit and walk away like a boss."

"I came to Kabul a few days ago and what i saw here made me devastated, kids starving and their parents begging for a single piece of bread. I tried to help as much as possible, bought rice bags, oils, flour, clothes, blankets to many families, but i cannot do this alone. I wanted to create a gofundme link but its not possible here since i am in afg. I urge you guys to pray for everyone here and if possible, help them financially. You don't have to be a muslim to feel the pain of afghans, you just need to be a human."

"If I'm starting with $10, is that enough?"

In places where unemployment levels are already recovering from pandemic highs, disgruntlement about wages, working conditions and work-life balance may be intensifying. More than 4.5 million Americans resigned from their jobs in November 2021, up from 4.2 million in October, a phenomenon known as the Great Resignation. Some version of this is also taking place in Australia, Germany, the UK and elsewhere. It's likely more of a reshuffling than a resignation proper, as workers leave their jobs for better ones, or to work for themselves. Still, in the US, labour participation rates remain below pre-pandemic levels and haven't budged. At least 4 million people have not yet returned to the labour force. It's not hard to imagine why: for such a wealthy country, the US treats many of its workers cruelly, with low wages, long hours and rampant instability. Even those with better jobs, materially speaking, may find themselves unfulfilled as they "spend their entire working lives performing tasks they secretly believe do not really need to be performed", as David Graeber wrote in an article that was the basis of his book Bullshit Jobs.

Because the forums I visited have participants from all over the world, I was already disabused of the idea that the cryptosphere was populated almost entirely by white Elon Musk types, as some of the rhetoric around crypto suggests. But even in the US, the numbers appear to paint a different portrait. NORC's study also found that 44% of crypto investors are people of colour (compared with 35% of stockholders), and 55% do not have a college degree. In the US, people of colour on average earn less than white people, are more likely to have crushing debt, and are less likely to own their homes. Only a small fraction of the $130tn wealth in America belongs to them. This aligns with the sentiments I've seen expressed on the forums: that people are there because they feel the odds of getting a leg up are stacked against them.

When I dug a little deeper, I found some reporting on these stats with a human angle. Last December the Washington Post ran a story about Penelope and America Lopez, twins who saved their immigrant parents from financial ruin because of investments they made in crypto. The article quotes Cleve Mesidor, the founder of the National Policy Network of Women of Color in Blockchain (and a former Obama appointee who worked inside the commerce department), explaining crypto's allure: "When you have been locked out of the system, when you haven't had pathways to create generational wealth, you see this as an opportunity." For Time magazine, the reporter Janell Ross went to the Black Blockchain Summit at Howard University in September 2021 and described the approximately 1,500 "Black crypto traders, educators, marketers and market makers" in attendance as a "world that seemingly mushroomed during the pandemic, rallying around the idea that this is the boon that Black America needs". There are risks, these authors observe, but whether they outweigh the potential rewards remains an open debate.

The risks are worth considering. Is replacing an exploitative and exclusionary system with an inherently vulnerable, unpredictable one a remedy to this system, or merely a reflection of just how debased it's become? There are no stats on how many people lose money in crypto, but there are a preponderance of hazards that may not be obvious to less experienced investors. There are the risks related to security and the lack of consumer protections, to volatility often linked to price manipulation by so-called "whales": exchanges, accredited investors, market makers and individuals who hold tokens in such large quantities that they can move the price on their own. (Unlike in traditional finance, there is no regulating entity watching the market for manipulation strategies such as wash trading, pumping and dumping, cornering and ramping.) There are the risks related to liquidation cascades, in which large institutional selling (or buying) induces a deluge of forced selling (or buying), the end result of which is no small number of individuals with emptied accounts. During these episodes, exchange platforms tend to suffer outages, making it impossible to log on and take action to protect your money.

There are the risks related to holding future "dead coins" - coins or tokens that start off having value but are later abandoned by their creators, not necessarily maliciously. And then there is the risk that, like the dotcom boom, the speculative bubble will burst and you'll be one of the people left holding the bag.

In the broader context, equal opportunity to participate looks like an equal opportunity to get wiped out.

When there's inflation, it's the Fed's mandate to rein it in. The cryptosphere has been following the Fed's activities with the kind of dedication and verve I would expect for football, not central banking. In the days preceding a meeting of the Federal Reserve Open Market Committee, or an appearance of Federal Reserve chair Jerome Powell before the press, the acronym FOMC circulates through Discord and CT with the frequency of a filler word, like bro. I notice how attuned people outside the US are to dollar imperialism, something that's easy to be unaware of when you live here. As Powell began to signal that the Fed would end its quantitative easing programme and hike interest rates, the US equities market reacted by selling off riskier assets. The more speculative sectors of the market, such as tech stocks, took a tumble. Many in the cryptosphere appeared surprised when the crypto market began to sell off, too.

If crypto is a complex Ponzi scheme, it's one that mainstream institutions are clamouring to get in on. The FOMO is too overwhelming. The same institutions, the same wealthy elite, the same nefarious forces that early cryptocurrencies such as Bitcoin and Ethereum were supposedly protesting, could now subsume their antagonists, rendering them impotent. As with the co-opting of any subculture, it can no longer be called a protest against the "system" if it is the system. There's nothing inherent in the technology that makes it resistant to being assimilated by the ruling financial order. There's also nothing inherent in the technology that guarantees that the multimillionaires and billionaires minted by crypto will be more benevolent elites than the ones we have now. (The World's Billionaires List published annually by Forbes counted 12 crypto billionaires among its ranks in March 2021.)

In December, a crypto influencer tweeted a sentence I haven't been able to shake: "They nuked wages so bad that now ppl have to gamble their way up the food chain through markets." It's a devastating description for being true and unvarnished, though I'm anxious that the worst is still to come. If the Fed starts to raise interest rates, making it more expensive to borrow money, it will discourage investment by employers and decelerate the economy, which could even slump into a recession. Either way, the unemployment rate is destined to go up, which means that working people will have less leverage to bargain for higher wages, which means they will have less purchasing power, and eventually, prices will stabilise to reflect this. It's a strategy that forces workers to pick up the tab. But so far higher wages do not appear to be amplifying inflation. A study published by the Economic Policy Institute in January reveals that in sectors where inflation is high, it's generally not because wages are high. Meanwhile, CEOs are bragging to their shareholders about marked-up prices and unparalleled profits, and using inflation as a cover. From 3M's most recent earnings call: "The team has done a marvellous job in driving price. Price has gone up from 0.1% to 1.4% to 2.6%." All the while the casino beckons. But we already know how that ends. We already know that the house always wins.

A longer version of this piece appeared in the Spring 2022 edition of n+1

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