Day Trader: The Reluctant Investor's Foray into Cryptocurrency

I’m generally not a terribly pessimistic person.  With the right amount of coffee I can find the good in most anything (Ranch dressing exempt).  I trend away from blaming my problems on late stage capitalism, and I don’t judge people who smoke cigarettes.  I even made it through 45 minutes of Requiem for a Dream with my roommate last summer, an affable frat-boy with an affinity for mid-career David Foster Wallace, über depressing films, and the rapper A$AP Rocky.  

I have, however, long kept the world of cryptocurrency — Bitcoin and all other forms of internet money, so to speak — at arm’s length.  But in late 2017, many of my close friends became, in theory, rich. How, you may ask? They, months earlier, bought a coin on the internet, and the value skyrocketed in a manner nearly unthinkable.  Decentralized currencies, it turns out, are not reserved for Silicon Valley billionaires who have lost faith in all major institutions, but rather are ripe for the picking by 20-year-olds with an ear to Reddit and a hand on the keyboard; many of them also appear to enjoy vaping in public spaces, but that’s neither here nor there.  It all seemed too good to be true. Nevertheless, what I previously found so off-putting started nagging at me — what if I had put in a few hundred dollars back in May when a most shamanly confidant ensured me, between bong hits, that it was a fool-proof plan?

Bitcoin and its internet currency counterparts have always presented themselves as, in essence, a perfect combination of things I dislike: personal finance, another reason to check my phone, and missed opportunity.  Indeed, investment in the form of digital currencies serves as an acute example of FOMO, new speak for a phenomenon as old as time itself (the Fear of Missing Out). Each day, one can track the gains and losses of a given coin from the comfort of a sleek iPhone app and rub it in the faces of those simpletons too naive to invest. The FDIC insures your account, and there are no trips to the bank necessary.  Not bad. Even the New York Times got in on the action (see: Everyone is Getting Hilariously Rich and You’re Not). Stroll through a business school and you’ll hear the word Bitcoin so many times it will start to sound weird (Bitcoin, Bitcoin, Bitcoin, Bitcoin Bitco…).  Still, the idea of accruing passive income, which I’m sure is nice and all, never got my blood flowing. I had come across the word Bitcoin a few years ago, and a high school buddy once even bought a fake ID for 1.5 BTC (Bitcoin(s)), which, at last year’s end, would equate to roughly 26,000 US dollars.

In addition to this cynicism, I’m, of course, late to the game.  My interest in exploring this sphere of modern finance extends beyond beer money, though. There’s another level to the world of cryptocurrency; everyone I’ve ever known that bought it became somewhat addicted.  Yes, making money is inherently something one wants to repeat, but it appears to be something more. Conversations and dinners all too often devolved into sometimes-tense discussions of why it is or isn’t a good idea to invest and if it is or isn’t anything more than an internet fad. An irreconcilable knowledge gap became clear.  Was I a monetary genius for abstaining or a closed-minded curmudgeon, unwisely writing this off just as Al Gore’s critics did the internet? It was too much and, on March 1st, well past the crypto gold rush, I gave in.

I decided to keep things modest.  I would take one hour’s wage from my job scrubbing dishes and setting tables at a sorority and invest in whatever coin was up at the moment.  Having downloaded an app called Coinbase and, perhaps against my better judgement, punching in the last 4 digits of my social security number, I was good to go. Up 4.6% was something called Ethereum, which, according to a quick google search, is, “an open-source, public, blockchain-based distributed computing platform and operating system featuring smart contract functionality. It supports a modified version of Nakamoto consensus via transaction based state transitions”.  Seems cool, I guess.

The way I see it, there are two reasons why people invest in cryptocurrencies: a.) because they truly believe that institutions central to American and/or global life are under siege, or b.) to make a quick buck.  On point a is where the idea of “blockchain”, or encryption, comes in to play; cryptocurrencies run on Blockchain, which is technically an incredibly secure, decentralized transfer system. So those more skeptical than I have, in the end, reasonable cause to keep digital currency as an asset, as it’s admittedly hard to have a sense of political and historical relativism in these trying times.  In a 2017 piece for the New Yorker, Evan Osnos chronicles a striking trend wherein America’s super-rich appear to be preparing for the end of times. They buy land in New Zealand, build bunkers, and line up travel arrangements in the event that things go south.  Osnos speaks with financier and biotech billionaire Robert Duggan, who offers this rationale: “The media is under attack now. They [doomsday preppers] wonder, is the court system next? Do we go from ‘fake news’ to ‘fake evidence’? For people whose existence depends on enforceable contracts, this is life or death.”. I presume there is a sizable overlap of those observed by Osnos and investors in decentralized currencies.  But, truth be told, I’ve only ever met one person who hopped on the cryptocurrency train for any reason other than the fact that it presented itself as a convenient investment opportunity.  And while its future remains a mystery, in the time being it seems perfectly feasible to earn some sizable returns, especially for those with some technical acumen and a little money to spare.

All of this being said, there I sat with my phone on a desk, not investing in Ethereum to take a moral stand or to make a huge sum of money, but because I’m just a little curious.  Will I, too, become an obsessive? Naturally, there’s not a ton on the line for me here, but you’ve got to start somewhere.

The Coinbase app itself doesn’t exactly convey the gravity of the situation at hand.  I quickly handed over my debit card and personal information. Perhaps this is a testament to my and greater society’s opting in to surveillance, coercion, and so on.  A few years ago, I was hesitant to use Venmo or Lyft, anxious about giving my card info to an app. Those days have come and gone. If the FBI is looking at me through my computer’s webcam, they must be pretty bored, and if I get my identity stolen from trying to buy Bitcoin, I’ll go down with the masses and hopefully get a nice check some time down the road.  In short, I’m unbothered.

Coinbase, the aforementioned app in which I’ve trusted some of the more sensitive details of my existence, shows the charts of each coin, like Bitcoin, Litecoin, or, my coin of choice, Ethereum, with a glowing green or red button to show gains and losses.  Looking at my investment for the first time was, I must say, quite the rush. Even though the word “Bitcoin” has clearly made its way into the mainstream American cultural lexicon and cryptocurrency is regularly on the ticker of CNBC, I still felt, somehow, distinctly ahead of the curve.   Peering into the app, a mere hour’s minimum wage earnings invested, my self-worth was slightly inflated.

In reality, not all was so well.  My stake in Ethereum was seeing devaluation by the hour.  When I awoke the next morning, it was down 5.1%. Surprisingly, I felt only a slight pang.  Being in the loop and losing out felt a little better than being an outsider altogether. I reason that my Psychology 111 professor was surely wrong about the principle of loss aversion - ‘tis better to have come out mildly in the red than to have never invested in crypto at all.  It would be a slippery slope toward an identity dominated by my internet assets, I feared. And all of this worry, I remembered, was being devoted to .014 of an Ethereum coin, a phrase that a few months before would have been, to me, totally arcane.

In a fascinating turn of events, I could feel myself being gamified, hooked on something abstract and about which I understood very little.  Perhaps it’s a sign of the times and the mark of an increasingly impatient generation, or maybe our collective Twitter feed wholly dictates our financial decisions, but the fact that so many young people have been readily willing to invest large sums of money in an untested, viral phenomenon leads me to believe that it’s at least partially by design.  With flashing charts, real-time analytics, and countless talking heads on social media floating through my head, it truly feels like more of a game than a long-term piece of my theoretical portfolio. Who talks about owning gold? That’s really no fun. Ethereum, on the other hand, is a reliable, albeit contentious, source of conversation.

Warren Buffett spent years deliberating on the decision to invest in Apple, even with the backing of hundreds of billions of dollars in assurance from his fund, Berkshire Hathaway.  He extols the virtues of patience and stability as hallmarks of the savvy investor.  What would Buffett say to me? I very nearly instantaneously entered another shift’s worth of cash into a new currency I quickly read about, only backing down after realizing it wasn’t on the Coinbase app.  

For three consecutive days, I awoke each morning and checked the app and, for three consecutive days, I reported losses.  Was this a normal occurrence? In a moment of frustration, I consulted a few cryptocurrency blogs. I estimate that there are hundreds of forums devoted to each major coin.  Like any subculture, especially those whose discourse is mostly confined to the internet, there exists a distinct vocabulary. Those touting cryptocurrency as the future of the financial world will not easily be convinced otherwise and, subsequently, preach far and wide a principle known as HODL, or “Hold on for Dear Life”.  Of all the lingo I came across on the crypto boards, this term was easily the most pervasive, even though I initially thought it was a recurring typo of the word ‘hold’. Nevertheless, I wondered if these anonymous posters had something to gain from telling me to grip my miniscule assets so tightly. I spent a few hours perusing the boards and saw countless iterations of the same don’t-sell argument. But their advice is not so easy to follow in practice; while it would be nice to commit to holding on, the app at my fingertips was far too tempting.  It seems the creators of the Coinbase app know it, too, as users can set alerts for changes in the performance of a given coin with by-the-second updates delivered straight to their home screens.

After six days, the slumping Ethereum started to inch its way upward.  It was, for me, neither agony or ecstasy. As far as my short-term investment went, the damage was done and, with only a touch of regret, I realized that some of my nine dollars would surely be lost.  The true joy would come in deleting the Coinbase app, thus ridding myself of the obligation to check and gains or losses. In the week of my cryptocurrency ownership, my coin of choice hit a peak of $856.52 and bottomed out at $654.10, rising slightly thereafter.  I was, in the end, pretty thankful to have invested such a small amount.

My short-lived digital currency investment proved at once entertaining and burdensome.  There are certainly aspects of the crypto world that I find helpful, however. First, it does break down some barriers for investment, which could help foster a more inclusive system, all in all.  Conversations around Bitcoin and its counterparts also seem to be relatively transparent. I, like many Americans, grew up believing that it was poor form to discuss the details of one’s finances; while it’s of course not always appropriate, I do believe that for any real strides to be made in combating income and wealth inequality, we should all be a little more open about our real standing in society.  So, even though hearing your friends and loved ones talk about internet money all the time can be annoying, it is not all for null.

But it’s not really for me.  Having sold my laughably small share of Ethereum, I felt a great sense of relief.  I pressed down on my phone screen and deleted the Coinbase app, hoping to avoid charts altogether for the foreseeable future.  Maybe it felt good to be in the know, but it was slightly better to be free of its obligations. It turns out even get-rich-quick schemes require some patience and self control, rules I will certainly employ when staking out an early space in the next viral-financial sensation.