Bill Gates hates it. Elon Musk loves it. Janet Yellen kind of, sort of likes it; but she definitely doesn’t want any of it. Jack Dorsey is obsessed with it. Mark Zuckerberg wants to copy it (what else is new). Snoop Dogg, Serena Williams, and Ashton Kutcher could potentially make a small fortune on it, as have some of the world’s nerdiest nerds. There are economists who predict it’s going to be worth $1 million one day, while others say that it will be worthless any day now. If you’d purchased just $1 worth of it in May 2010, that investment would be worth almost $5 million today. (When I did that math I uttered the same expletive you likely just did.)
Yes, I’m talking about that insane, mind-boggling, gibberish-inducing phenomenon called Bitcoin.
If you’re wondering what on earth is going on with the world’s first cryptocurrency (or any of them for that matter), you’re not alone. Since the COVID pandemic began in early March, Bitcoin’s value has risen more than 1,000%, reaching an all-time high of almost $58,000 each this week, based on nothing more than market speculation, before taking it’s usual vertiginous fall, and dropping roughly $10,000 in the last few days based on little more than an Elon Musk tweet. But while a lot can happen during any decade—10 years ago today, the iPad hadn’t yet been invented and Donald Trump was still a washed-up reality-TV star instead of being a washed-up, twice-impeached president—the rise of crypto over the past 10 years has been one of the standout investment opportunities in human history, and yet, one of the most confusing and, perhaps, without merit since we started trading in Mesopotamian shekels.
Part of the problem with the crypto segment of tech and finance is that most forms of cryptocurrencies only make sense to a small handful of people, and are barely comprehensible to most of us. Just look at the description for any of the new up-and-coming “coins” that have been recently released: “We are your go-to yield farm running on Binance Smart Chain and Pancakeswap exchange.” (Yes, exactly.) There is no question that the future of finance is going to be digital, whether it’s cryptocurrencies that are pegged to physical notes, like the U.S. dollar or the Japanese yen, or a global monetary asset, like gold or silver, there will come a time (in our lifetime) where it will be a norm to pay for things, in the real world and the ever-changing digital one, with some sort of crypto coins. It may be that we shop on Amazon with Amazoncoins, or buy a house with some form of digital assets—no one knows, yet—but what’s happening right now with the frenzy around buying crypto assets is largely a result of pandemic-era boredom, where people with expendable income (or gambling problems) have little else to spend their money on, and too much time to see that they might be missing out on a get-rich-quick scheme—PFOMO, pandemic-era fear of missing out? Add in a little GameStop-Reddit-style investing with crypto apps, like Coinbase, and voilà, you’ve got the frenzy currently taking place with Bitcoin and its ilk—though, let’s be honest here, crypto is a point of privilege in the midst of a global pandemic with rampant job loss and mile-long lines at foodbacks. For those more fortunate, crypto has become the go-to investment opportunity. “Right now, there’s no reason to buy fancy clothes, you can’t go on luxurious vacations, or dine at extravagant restaurants, so people are looking at places to put their money,” one Bitcoin retailer investor told me. “Seeing how much you can make on these investments can quickly become addictive, and next thing you know, you’re all in.”
But while the potential return on investment can be staggering, so can the real losses. In December 2017, Bitcoin was riding high at close to $20,000 each, and then fell dramatically, and didn’t fully recover until December of last year. Now, crypto is going in the opposite direction, with the collective market capitalization of all cryptocurrencies being traded in the world today being worth over $1 trillion. But there’s also real fear of a crypto bubble that could go pop at any moment. “It feels so frothy right now,” an investor told me recently. “When you have your neighbors telling you which crypto to buy, something is probably going to go pop pretty soon.” The investor said the current state of play reminds him of the stock market in the late-’90s, when everyone got greedy, from the venture funds who were backing these start-ups with no revenue and no business plan, to the bankers who were getting rich on companies that were going public but had no business doing so, to new investing websites that were allowing moms-and-pops to invest in tech start-ups, and the frenzy that ended in the dot-com bubble pop, where $5 trillion fell out of the markets within two years.
Now, the hot new thing is NFTs, or non-fungible tokens, which are essentially digital art projects that can generally only be purchased with cryptocurrencies, and that can’t be hung on your wall, given that they live on the internet. The hot commodities in this space are things like “N(BA) Top Shot,” which are like cryptocurrency trading cards merging into a form of digital art slash collectibles (don’t try and make sense of it, trust me), some of which are worth $250,000 each, or one in a series of 10,000 unique pixelated characters, called CryptoPunks, that are currently selling for between $35,000 a piece, to a laughable few that are hoping to fetch more than a billion dollars. “It feels very similar to what buying Bitcoin would have been like in 2010,” one NFT investor who owns CryptoPunks told me. “Spending real money to get something you can’t even really explain to your smart friends.” The investor acknowledged that it’s definitely a big bet to buy these NFTs, but if it proves to be a thing, owning one of the CryptoPunks could end up being like owning the Mona Lisa.