‘The casino beckons’: my journey inside the cryptosphere

I can't explain exactly how I ended up on crypto Twitter (or CT, as it's known in the cryptosphere) and in the crypto-focused Telegram and Discord groups I started lurking in late last summer. As a writer I don't really have a regular beat. I've occasionally written about fiction and film. I've written on the overlaps between the health and criminal legal systems. Crypto would not be an obvious story for me to tackle. But there was a bull run going on - market confidence was high, investors were buying and prices were going up - and whenever cryptocurrency values skyrocket, the corporate press turns up like a kettle of raptors spewing headlines about improbable fortunes. "This mom quit her job to focus on crypto full time and build 'generational wealth.' Now she makes around $80,000 per month." "This 33-year-old 'dogecoin millionaire' is now being paid in the meme-inspired cryptocurrency - and continues to buy the dips." The subject was impossible to avoid, and my longstanding if until now private, nerdy interest in the machinery of our enigmatic financial markets propelled me toward it.

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.

In time I grew familiar with the way the crypto obsessives express themselves, the phrases and acronyms they use: gm (good morning), wagmi (we're all gonna make it), ngmi (not gonna make it), and its corollary hfsp (have fun staying poor). I learned to distinguish the swing traders and scalpers from the hodlers (hold on for dear life) and degens (degenerates, or speculation addicts) by the way they talk and post. I perceived the subcultures within their subculture  -  the Bitcoin maxis (Bitcoin is the one and only crypto) v the Ethereum maxis (Bitcoin is for boomers) v the Eth-killer maxis (Ethereum is ngmi)  - and how they signal their allegiances through their avatars (Bitcoin maxis often have lasers shooting from their eyes) and, for a smaller subset, their self-care habits (some Bitcoin maxis only eat meat; others won't use seed oils, wear sunscreen, ice their injuries, or touch receipts). Across the forums, I could not discern any unified politics other than a shared certainty that the government and wealthy elites are keeping the little guy down.

Reporting on financial markets tends toward extremes. There is the hopelessly mystifying description of market movements, in which byzantine concepts are compressed into small units of abstract language, and then there are the individual stories. In reports on the crypto markets, these stories generally feature people during a bull run getting rich through dumb luck or getting rich and then losing it all. Lurking in these groups provides a third angle. Here are people with complex lives and distinct needs and desires, battling their emotions  -  their greed and, just as important, their fear  -  through buying and selling. These are not, for the most part, wealthy people intent on obtaining more wealth. They are people trying to teach themselves how to get ahead in ways they believe were previously foreclosed to them. They call one another "fam", cheering on those who make a winning trade and commiserating with those who get "rekt", as if they aren't all opponents on the trading battleground.

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.

It's influencers (who else?) who make the hype go round. A few of them are people with genuine skill and knowledge, or "OGs" who traded through at least one of the previous bull runs and over time built followings through displays of wisdom about how to grow a portfolio and trade the charts. Some even produce free educational content and preach the gospel of risk management (eg never risk more than 1% of your portfolio). But no small number appear to be marketers paid to push a given token on their followers. They buy the token at low prices  -  or are given an allocation as payment  - then promote the token once the price is inflated. When their followers buy the token, it gives them the opportunity to exit their position at these higher prices (every seller needs a buyer). They use Twitter, YouTube, Instagram and TikTok, and some have private Telegram and Discord channels. If you're new, it's not always easy to ferret out the people who are mostly good-intentioned from those who have no shame. But the charlatans tend to give themselves away by posting a lot of "hopium" ("#bitcoin rewards those who are patient", "I hope all 950,000+ of my Twitter followers become #crypto millionaires in 2022!").

There are outright scams, too, among all the legitimate projects. It's the norm for developers to remain anonymous, and anyone can easily spin up a token and corresponding liquidity pool to make it available on a decentralised exchange. The creators of the play-to-earn game Squid Game borrowed from the hit Netflix series its name and design scheme  -  and also its winner-takes-all denouement. Buyers of the $SQUID token found it was nearly impossible to sell, and after the price shot up 110,000% in the span of about a week, the creators pulled the rug out from under the project, removing its liquidity and making off with around $3.36m. Tweet anything containing the words MetaMask or Trust Wallet, the names of two widely used crypto wallets, and phishing bots unfailingly turn up posing as support staff. After luring the unsuspecting into their DMs and convincing them to give up their seed phrase (a kind of password), scammers immediately use it to drain the wallet of funds.

All this I expected to find. What I did not expect to find in this corner of the cryptosphere was an overwhelming number of seemingly ordinary people of all ages  - some still teenagers, others parents of small children or caregivers to older family members  -  desperate to make money to get by. These were not the people I imagined seated behind a multiscreen trading setup or moving assets around an investment portfolio. Many were here, trying to make money in crypto, because they felt they had no other choice. People struggling financially, who despise their jobs, who feel the system is rigged and there is no way out. People whose country has been at war for years and want to leave, or who have left and want to help family members who stayed behind. From crypto they draw optimism for the future, the possibility that their lives could change, or that they could change the lives of others:

"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."

"Don't assume that if things are going well for you they are going well for everyone. I'm a girl in uni and take care of my whole family. I'm not here to whine I have accepted how life is and I am patient . I'm going to try so hard to grow my $83. This group on its own motivates me a lot ."

"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."

"Got a dollar raise at work today lol, they felt like it was so nice of them but it's really not shit ."

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

These expressions of frustration and, at times, despair, are from people living in the US, UK, India, Turkey and Afghanistan. The countless other messages I've seen like these span an even wider geography. They surface amid the casual misogyny, the dick talk, the advice on managing steroid-induced anxiety  -  men (and occasionally women) letting their guard down in moments of vulnerability.

In the wake of a pandemic that forced people out of their jobs and upended work life, obliging a lot of people to stay home, it makes a certain kind of sense that people are looking to supplement already precarious incomes with crypto. All you need is a smartphone. This is especially true in places where local currencies are weak. In the Philippines especially, but also in Venezuela and Brazil, people played a Pokémon Go-style game called Axie Infinity because it was more lucrative than other forms of employment. You play the game, you earn digital assets, and you cash out these assets for local currency. The value in local currency fluctuates, of course. "Here in the Ph," someone wrote on a Discord forum in early August, "lockdowns are so frequent so people are striving and trying to take chances in 'play to earn' stuff. Even the best financial advisors here promote [in-game tokens] $AXS, $SLP and $SKILL here now and people are crazy about it coz they're really earning."

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.

Resentment for these working conditions has found expression on the subreddit r/antiwork, where nearly two million subscribers post grievances about their employers, share stories of being overworked, and offer one another moral support. (Graeber's writing serves as one of the group's intellectual foundations.) Speaking on behalf of the subreddit, the historian Benjamin Hunnicutt told the Financial Times, "We maybe consider that there might be an alternative to living our lives in thrall to the wealthiest among us, serving their profit." In China, a parallel movement has emerged. Tang ping, or "lie flat", describes a trend among the young who are protesting the nine-nine-six work life  -  ie 9am to 9pm, six days a week  -  by opting out. The point is not that people are leaving their abject and exploitative jobs for crypto, but that many wish they could, if only they had enough money. That's why they're here.

The hypermasculine tenor of most day-trading groups, where technical analysis is the primary profit-making strategy, suggests that most crypto traders are male. But in forums focused on DeFi or NFT collecting, where analysing fundamentals and being early to projects are the primary focus, avatars suggest the presence of women, or at least of people who aren't averse to having femme anime characters stand in for them online. (Most are anonymous, so there's no way to know.) The spirit of the DeFi groups is a little different from the day traders' toxic jock vibe. It's less macho  - maybe because these spaces have rules about conduct and moderators who enforce them. It's here that every financial product you might access through a traditional bank is being replicated. The fact that users can remain anonymous, supporters say, removes the barriers that leave so many people unbanked or unable to access credit.

Still, I was surprised to learn that, according to NORC, a research institute at the University of Chicago, 41% of cryptocurrency traders in the US are women. I would have guessed the percentage to be lower. I also assumed that most investors would be younger than me, in their early to mid-20s, but the average investor is 38  -  an age that, being not far off my own, I can't help but reflect on. It's the age at which I began to find it increasingly difficult to suppress anxiety around my own financial vulnerabilities. From this vantage, the appeal of being able to fill in financial gaps or respond to a financial emergency by transforming $100 into $1,000 in the span of hours or days, not years, is more legible to me. If you're desperate, the time horizon for other kinds of change  - at the policy level, say  -  can seem too far off.

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.

I keep returning to the idea that our present moment is a kind of reverse mirror image of the one in which Bitcoin was launched. We are once more living in the aftermath of an economic crisis  -  this one induced by Covid-19  - and, in the US, the Federal Reserve is in the spotlight. But conditions are markedly different: growth is relatively high (not low), unemployment is relatively low (not high), and wages are rising at the fastest rate in 20 years. These are signs that the US economy has muscle. But its vigour is being overshadowed by the spectre of inflation. In the past 12 months, the price of buying a home in the US has soared by nearly 20% -  an increase that, according to one economist's estimate, will force working-class households approaching homeownership before the pandemic to resume saving for another five to 10 years. The price of meat, poultry, fish and eggs has gone up by around 12.5%; the price of fruit and vegetables by around 5%; and the price of electricity by 6.3%. It's hard not to feel a sense of defeat. All the news of rising wages notwithstanding, the average earner is actually worse off than they were a year ago.

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.

There is a contradiction that those who truly believe that crypto exists outside our financial system will have to contend with: this latest bull run appears to have been fuelled by government stimulus and by easy monetary policy, and the removal of these policies, at least at the time of writing, seems to have brought it to an end. There is another, related contradiction: banking giants BNY Mellon, Goldman Sachs and JPMorgan Chase have all begun offering clients access to crypto products. Bank of America has started a crypto research division. A recent survey of 100 hedge fund officers across the world found that by 2026, executives expect their portfolios to hold an average of 7.2% of their assets in cryptocurrency; in the US the average is even higher, at 10.6%. Meanwhile venture capitalists have been pouring money into the sector: an astonishing $32.8bn in 2021. The moneyed art world  -  the commercial galleries, the auction houses - are already profiting from NFTs. And this year's Super Bowl was dubbed the Crypto Bowl on account of all the crypto-related ads viewers were subjected to.

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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