Most readers have probably heard of Bitcoin, the digital coin that dominates the cryptocurrency market. It has gained notice both because of its skyrocketing value (from less than a cent in early 2010 to around $2,600 currently) and because it is frequently a key player in hacking- and black-market-related stories, from the looting of nearly half a billion dollars in coins from the Mt. Gox exchange in 2014 to the recent demand for payment in Bitcoin in the WannaCry ransomware attack. (For the uninitiated, here is a useful primer on Bitcoin.)
But do you know Ethereum, with a total value of coins in circulation of close to $20 billion? Bitcoin Cash, which split off from the original Bitcoin on Aug. 1, lost about half its value within hours, then nearly quadrupled by the next day? Or, rounding out the Big Four, Ripple — whose currency is known as XRP — which shot up to about 40 cents by mid-May from less than a cent at the end of March? (Full disclosure: I owned but unloaded three of these currencies before writing this article.) Then there are over 800 lower-value and often creatively named coins among those listed on Coinmarketcap.com. One can buy FedoraCoin (its jaunty symbol being the Justin Timberlake-approved hat), CannabisCoin (one guess what it looks like) or, to choose one of many bringing up the rear, Quartz, currently priced around three-thousandths of a cent. (Bad news for those who bought it at just under $2 at the end of May.)
After years as a niche market for technologically sophisticated anarchists and libertarians excited about a decentralized financial network not under government control, digital coins may be on the verge of going mainstream. “It’s the wild, wild West,” said Ron Ginn, 35, founder of a private photo-sharing service called Text Event Pics in St. Augustine, Fla., who has taken all his money out of the stock market and put it into Ripple and real estate. “This is like getting to invest in the internet in the ’90s. I’m obviously very bullish, but I expect to make a couple million dollars off very little money. This is the opportunity of a lifetime. Finance is getting its internet.”
Cryptocurrency has understandable appeal to millennials who came of age during the 2008 financial crisis and are now watching the rise of antiglobalist populism threaten the stability of the international economy.
Unlike previous generations, many of these greenhorn investors don’t have pensions or 401(k)’s, are mistrustful of socking money away in mutual funds and are fully accustomed to owning digital assets that have no concrete properties. As traditional paths to upper-middle-class stability are being blocked by debt, exorbitant housing costs and a shaky job market, these investors view cryptocurrency not only as a hedge against another Dow Jones crash, but also as the most rational — and even utopian — means of investing their money.
Sebastian Dinges, 33, the director of operations for Cheeky, a company that makes mealtime products, started his first job after college in 2007. Once he had enough money to invest in the stock market, he said, he “wanted to be risky and get a big return.” Within six months, the market crashed.
“So there’s definitely disillusionment,” he said.
The majority of Mr. Dinges’s holdings are now in cryptocurrency. His skepticism of traditional markets is shared by a number of cryptocurrency enthusiasts in his age bracket who have observed the recent political and economic upheavals.
“I do feel we’ve reached a new level where nobody knows what’s going to happen,” said Gabe Wax, 24, who runs the Rare Book Room recording studio in Brooklyn. “The things we’ve been able to rely on aren’t as reliable and we have a president who knows absolutely nothing about how the economy works, and he’s appointed people who have twisted views about how it works. That, more than anything, is what scares me.”
Mr. Wax was still in high school when the 2008 crisis unfolded, but he was paying attention to the headlines. So was Mr. Guarco, who said cryptocurrency was a “safeguard against the volatility in the rest of the world.”
“Investing in cryptocurrencies is a hedge,” he continued. “We’re entering a period of long-term deregulation and tax cuts to the wealthiest. It’s not the best recipe for stability.”
Mr. Wax also invests in cryptocurrency to shore up his finances as a freelancer in the precarious music industry.
“I constantly feel like I’m looking over the edge of a cliff,” he said. “I don’t like the idea of money just sitting in a savings account — with the way inflation works and how low interest rates are, you’re losing money. There’s less money than there’s ever been in the history of recorded music, so that gives me anxiety. It’s weird to say that owning cryptocurrency soothes that anxiety, because it’s counterintuitive, but it does.”
He is far from the only one hoping cryptocurrency will assuage his financial worries. Internet forums and Twitter accounts devoted to the subject abound with speculators who view digital coins as a lottery ticket, forecasting “moonshots” with, perhaps, irrational exuberance. For office drudges, the underemployed or those crushed by college loans, the slim chance that a $100 investment may someday reap close to $100 million — as would have happened with an investment of that amount in Bitcoin in 2010 — is too enticing to pass up.
But there are plenty of dissenters who are less sanguine about the future of cryptocurrency, arguing that we are in the midst of the biggest bubble yet, fueled by speculative trading in Japan and South Korea, and pointing to previous Bitcoin crashes as justification for their skepticism.
Nevertheless, it’s not just twentysomethings in the gig economy who are losing faith in traditional investment tools. Mr. Ginn quit working at Fidelity Investments the day before the market crash in 2008.
“It’s not investing,” he said of his old job. “It’s just sticking money somewhere. The investment advisory industry has to give out watered-down, averaged-out advice. When you get into mutual funds, you lose a lot of the ability to beat the markets.”