“A friend of mine came up with a variant on [Occam’s razor, which is] that the most ironic outcome is the most likely one,” Elon Musk told fellow billionaire Jack Dorsey and Ark Invest CEO Cathie Wood during a virtual Bitcoin conference in July. Musk, who had been delivering a relatively sober perspective on blockchain technologies, seemed delighted that the conversation had turned to Dogecoin, the satirical cryptocurrency devoted to memes and dogs.
“And then I have a variant on that, which is the most entertaining outcome is the most likely one,” he continued. “If that is true, then the most ironic and entertaining outcome would be that the cryptocurrency [Dogecoin] that was started as a joke to make fun of cryptocurrencies ends up being the lead cryptocurrency.” Musk laughed.
Within minutes, Musk’s to-the-moon energy had spread to Telegram, TikTok, and Reddit. Inspired by Musk’s remarks, rapper Busta Rhymes announced to his 3.8 million Twitter followers that he was now “sold on Bitcoin.” In no time, the cool kids in Discord’s trading forums were labeling Doge a “pleb coin,” implying that regular people were flooding into it and fueling speculation (as of mid-August, it’s up 9,222% year over year).
The year 2021 will be remembered as the moment when financial culture and internet culture converged, leading to investment bubbles in everything from meme stocks to tokenized collectibles. But cryptocurrency trading, a largely unregulated casino, arguably represents the purest synthesis yet of personal finance and online social status. On TikTok, for example, one of the more popular formats involves a bro offering investment tips, talking-head style, while displaying the value of his crypto portfolio behind him; a billion or trillion of anything, apparently, is good for both the ego and the algorithm. And everyone wants in. In the past 12 months, upwards of 5,000 new crypto coins have launched. By August, SEC chair Gary Gensler was sounding the regulatory alarm and asking Congress to step in.
While lawmakers weigh their options, the desire for instant wealth—and the attendant boost in social currency for anyone who got in early and gets out before the inevitable “rug pull”—is overwhelming any warning cries. The vast majority of the amateur investors buying up Dogecoin will lose money, but they’ve gained a chance to burnish their credentials as card-carrying members of an internet tribe led by Musk, who can afford to treat it all like a joke. (Dorsey, a Bitcoin whale, has his own fan base.) “This is much more about a kind of identity formation than it is [about] anything to do with economic forces or motivations,” says Bill Maurer, director of the Institute for Money, Technology, and Financial Inclusion.
This pursuit of likes via penny stock altcoins may sound trivial. But it’s a symptom of broader malaise. Upward economic mobility has been declining in the U.S. since 1980, meaning that millennials and subsequent generations have no memory of good times. Warned that they will get wiped out, younger crypto investors respond with a shrug. There’s nothing to lose and everything to gain.
All the while, more and more economic activity is concentrating in attention-economy platforms that Silicon Valley controls. What could possibly go wrong?
Money and status have always been linked, but the gamification of our financial lives didn’t begin in earnest until the 1980s, when Discover Financial, then owned by Sears, introduced a cash-back program tied to its credit card. Soon after, banks and airlines started to team up to tie personal spending to earning miles, which could be redeemed for perks like airport lounge access, encouraging consumers to optimize themselves and their wallets. The more you spend, the higher-class you become! Household debt be damned.
After the 2008 financial crisis, fintech startups, Bitcoin, and gamification ploys all blossomed in libertarian-leaning Silicon Valley, nudging people to see themselves as owners who could transform the system that burned them. The stock-trading app Robinhood, which doles out free shares to new users and lowers the barrier for trading crypto and risky options, represents all these trends in one.
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With Robinhood, at least, most users are gambling (er, investing) with their fun money—$20 here, $50 there—in order to create fodder for group texts and snaps. When it comes to maximizing social influence and wealth, the stakes are far higher for professional digital content creators, a group that now numbers more than 2 million. They are playing what tech analyst Packy McCormick, author of email newsletter Not Boring, calls “the great online game,” in which social media is where you make your moves and crypto is how you keep score. Altcoin cryptocurrencies, in particular, offer creators a shot at the kind of equity-based wealth that social platforms have denied them.
“They don’t want the constant churn of creating content to be their only revenue stream,” Josh Constine, principal investor for the venture firm SignalFire, says of these vloggers, podcasters, and streamers. The most successful of these folks, he says, will build “a sort of creator pension out of equity stakes” in startups and altcoins aligned with their audiences.
Some tech-world philosophers believe that the great online game will soon be something that everyone plays. For a taste of this future, witness the sudden rise of Axie Infinity, a Pokémon-style game that compensates winners with its own Smooth Love Potion cryptocurrency and is attracting players by the millions. In countries like the Philippines, playing Axie is more lucrative than many traditional jobs—at least for now. “Some people who were previously making $5 per day now make $20 [playing Axie],” McCormick wrote breathlessly in a recent newsletter. Axie’s founders, meanwhile, are on track to make $1.1 billion by the end of the year.
“The sort of utopian song that goes into [these projects] is about, how do we share the fruits of our commercial activities in a way that rewards users, [but it’s] driven by a self-interest to get users to adopt stuff faster,” says Lex Sokolin, head economist for the blockchain company ConsenSys. “But it’s sitting on top of this hypercapitalist infrastructure. And the infrastructure is owned by billionaires.”
Crypto’s boom can be credited, in part, to social media softening its edges. Savvy developers have learned to mint coins that are likable, shareable, sometimes laughable. Clever promoters like Musk continue to be the biggest winners. Tactical middlemen benefit by collecting exorbitant fees for trading, voting on protocol governance, and other forms of community participation. And the plebs?
What’s happening in money culture right now looks something like this: The masses, frustrated by rigid societal inequality and a lack of economic opportunity, are playing whatever new lottery comes along. They invest their social media selves in lottery communities, and they put their savings in scratch tickets. The price to play is expensive, the rules are designed for them to lose—and they do. According to research firm Chain alysis, investors lost roughly $2.7 billion to investment scams in 2020. All signs point toward even more instances of fraud in 2021. Do your own research, crypto veterans admonish.
“The price of this token can never go down . . . it’s really cool,” the creator of a coin called Surge said in a YouTube interview in August. Thousands of viewers reveled in the hype. “I just bought 367 million [Surge coins] for just 5 bucks!” one wrote in the comments. “This is lightning in a bottle!!!”
We’re almost surely in a bubble. Or rather, we’re in the midst of an ever-rotating cast of mini-bubbles. None may be big enough on its own to create a financial panic. But together, they reveal the deep and increasingly dangerous flaws in our traditional institutions. It would be relatively easy for regulators to devote more resources to policing cryptocurrency. Harder, but far more important, will be rebuilding trust by making economic growth—and the financial establishment that serves as its gatekeeper—accessible to all.