The other week, gripped by Fear Of Missing Out (FOMO) and the tantalizing feeling that I could still become super rich if I were to only stop equivocating and make a bet, I bought some cryptocurrency. It felt like millionaires were being minted overnight, and that I could no longer afford not to be one, to be stuck working at a job like a sucker. This was mid-December, when Bitcoin was still rocketing up and nobody really knew what to do with it. I had missed the Bitcoin boat, that much was clear, but like so many others I was determined not to miss the next one. Armed with just enough information to be dangerous, I downloaded Coinbase — the noob's choice.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
I noticed Litecoin, which had yet to make the sort of leap that Bitcoin had already made. But I was busy that day and didn't get around to it — Litecoin went from $90 to north of $300 in an instant, another boat missed another bout of FOMO. Determined not to be left behind again, I bit the bullet and made a small bet on Ethereum, and just like that, it doubled too. From one perspective, I was happy — money for nothing. From another, psychologically powerful perspective, I was frustrated. I didn't see the money I made, I once again saw the money I had missed by not making a much larger bet — gamblers out there might recognize this feeling. I pressed on, convincing myself I knew what I was doing.
From there, so-called “altcoins” seemed the obvious choice. Bitcoin was doing well but didn't appear likely to deliver the mind-spinning gains that it had done in the past — for those you'd have to pick up something less established. I did my research — the sort of research that takes place primarily in a Google search bar and a few Reddit forums but still qualifies as research — and I went with Ripple (XRP). Ripple was unpopular with the Redditors for its centralization, but I had the feeling that this current wave of crypto-interest was coming less from the techno-libertarian set that had kicked off Bitcoin and more from institutional and mainstream small investors. It had actual utility for international bank transfers, increasing hints of partnerships with large organizations and rumors about the sort of Coinbase listing that had recently spun Bitcoin Cash into the stratosphere. Ripple came at a low price of just under $1, even if that low price was somewhat deceptive given the massive supply that would necessarily keep it from reaching Bitcoin-like price heights without consuming the entire world's economy. Still, not everyone knows that, and I figured that the low sticker price might entice enough investors like myself to start pumping the thing.
Which is just to say: I made a semi-informed decision and placed my chips. I could just have easily been wrong, but it turned out I was right, and my initial investment has doubled. I didn't quite buy it at the price I wanted because an overloaded Coinbase was taking forever to turn US Dollars into the Bitcoin I would need to buy the Ripple — but I did get in before a giant surge, and that surge continues at the time of this writing.
Again there was that feeling, the feeling unmistakable to any gambler that's ridden a high, however short or long. There's the elation of being right as well as the feeling that it isn't quite money for nothing, that you made this money because you are smart and savvy. And because everyone starts with a small bet, that feeling is soon followed by the notion that you should keep playing. And not only keep playing, but play bigger. Had I made twice as big a bet that first time around, after all, I would have made twice as much money. Had I thrown every last dime I have to my name I would have wound up with twice as many dimes. But the ease with which money comes to the gambler, as so many old sayings will tell you, is matched only by the ease with which it leaves. Maybe I would have doubled my life savings, but maybe I'd be broke.
We know this on an intellectual level — that gambling has some serious drawbacks. But that applies to everyone else, and my bet landed. Who's to say my next bet won't land? Or maybe I should go into full day-trading territory, liquidate my Ripple and try to either buy it again at a lower price or throw that cash into something with the potential to double more quickly. It's tempting.
Right now, at least for the somewhat-informed investor and perhaps for more investors than would describe themselves that way, cryptocurrencies feel like a roulette wheel with an opaque piece of plastic covering all the numbers. In real roulette there are a bunch of red tiles, a bunch of black tiles, and a single green tile. That green tile isn't included in any of the grouped bets, and it's the key to the game. It means that if you bet on red or black an infinite number of times, you're bound to lose because the odds come in just under 50-50. And because the house is betting an essentially infinite number of times, it means that Casinos can safely place roulette wheels prominently on their floors. In the crypto wheel, however, one gets the feeling that there are more black tiles than red tiles, maybe even many more. Maybe making bets and seeing where they land is actually the correct economic strategy because the odds are better than 50-50. And I think that idea may be right, at least for now. The space feels like it's in expansion, and right now there's money to be made, even if it is indeed a bubble. It's why even nonsense bets on a meme-oriented coin created as a joke could have yielded 90 times your initial investment. But if we play for long enough we might take that cover off and discover that it was really all green tiles and that the house is walking away with all our money. Bitcoin has minted millionaires, but it's estimated that around 1000 people own 40% of the market. This is even more true with Ripple.
The headline states that I've made around $3000 from my bets, which is true and not true. Yes, the value of the cryptocurrency I have purchased has increased by about $3000 since I purchased it. But I don't have that $3000 right now, I just have a bunch of cryptocurrency. I will have made $3000 if and only if I decide to cash it out. But would I be losing money or making money by doing that? And what if I literally just lose all of it, through any number of the dumb ways I might lose access to my store? Questions for another day. For now, I'll let it ride.
Disclosure: The author participates in cryptocurrency markets and holds a long position on Ripple.