Life savings in bitcoin
This story originally appeared in Jacobin Magazine on May 18, It is shared here with permission. The values of major cryptocurrencies have been sliding for months, but the crash entered a new phase last week. TerraUSD or UST was the third largest stablecoin on the crypto market, while Luna was the fourth most valuable cryptocurrency by market valuation. But now both are virtually worthless—and a lot of people have lost a lot of money. Eventually, moderators restricted new posts and pinned international suicide hotlines to the top of the page as people with huge losses said they saw it as their only way out.
Venture capitalists flooded money into the space, tech workers took jobs at crypto start-ups, and the media was happy to report on all the money changing hands. The headlines about the high returns that a select number of people were making and the conviction of many supporters that crypto could only appreciate convinced a lot of people to risk their money on highly volatile assets.
Spike Lee starred in an ad promising crypto would empower marginalized groups, some internet advocacy organizations asserted it was the path to decentralization, and a whole range of groups deployed exploitative blockchain projects in the Global South claiming they would help locals. But UST had no backing beyond other cryptocurrencies. Shane Blake, a digital marketing worker, used his life savings to buy cryptocurrency.
But much of this investing is ill-informed. What blockchain is it built on? What is its use case? I put my life savings in. He insists that he knows what he is doing, and picks his investments carefully. Where do these young people go when they want advice on their investments?
Social media , of course. Virtually none of these communities or content creators adheres to FCA guidance around the giving of financial advice. Aged 20, the University of Nottingham student has , followers on TikTok , where he shares videos about entrepreneurship , affiliate marketing and investing.
Banks is always careful to emphasise in his videos that he is not a qualified financial adviser, and urges people to do their research before investing. So lockdown accelerated people starting side-hustles, because they were bored. Plus, crypto has been booming. People are seeing crazy returns.
Meanwhile, many of the self-styled gurus make their money by selling courses, rather than investing in the market. The year-old trader from Boston, Massachusetts, declines to give me his real name. However, he does not have any qualifications to give financial advice, having studied marketing at college.
It takes a lot of skills. When your future feels inherently uncertain and unpredictable, with global financial systems rigged against you, and stability, homeownership and the promise of upwards social mobility a gift only earlier generations had within their reach, why not embrace risk? The competition is out there. Everyone has a degree, so degrees are meaningless.
We live in a society where monetary recompense has become increasingly disconnected from our labour. People from black, Asian and minority backgrounds the people most likely to invest in risky financial products on average earn less than their white peers , are less likely to own their homes, and are more likely to get into debt.
Meanwhile, social media has swung the doors open on the lifestyles of the super rich. On eToro, stocks flash green and red like the lights of a Christmas tree, depending on how they are performing, as they would in a physical stock exchange. This fuels riskier, emotion-driven investment decisions.
The gamification of the major investing apps and platforms also drives gambling-like behaviour. The securities regulator alleges that the platform encourages inexperienced traders to make risky purchases by gamifying the experience, sending customers emoji-filled messages that influence them to buy shares, as well as highlighting trending products in a way that encourages a Fomo mindset.
People brag about making money. But you never hear when people start losing money, because of the guilt and the shame Blake has seen his friends get sucked into day trading, a high-risk form of investing where people try to make money by buying and selling a financial instrument as its price varies multiple times during a day, hoping to make a minuscule profit on each trade. Three years ago, the clinic began accepting people with cryptocurrency addictions: since then, Marini has treated about 30 clients, mostly young men, for addiction to cryptocurrency trading in particular.
But you never hear when people start losing money, because of the guilt and the shame.
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