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1
Is Everyone Getting Rich without Me?
April 2021:
Nine Months Earlier
Getting rich is a long, slow, steady process: get a job, do your work, get promoted, invest in your 401(k). With a few good promotions, maybe a strategic job switch or two, and years of diligent saving, hopefully, someday, you will "make it" and earn the retirement of your dreams.
But what if there were a faster way?
Five months earlier, I had quit my marketing job to find work I was more passionate about. Now, I was running out of time. I had a popular blog that earned me some money, and I would have loved to have found a way to write full time. But our daughter was due in six months, and I was unemployed. I needed to figure something out fast.
I was learning to code, and programming jobs paid well, so that was the obvious answer. But it felt like, everywhere I looked, young people were cirvumventing the system to amass huge amounts of money, enough to live off for years, even decades. Some of these self-made millionaires had built businesses or created new technologies, but a shocking number seemed to have found an easier path: they'd gambled on crypto.
I finished the last of that day's coding classes and went inside to make more coffee. After first diving down the programming rabbit hole a few months earlier, I started spending twelve hours a day indoors, hunched over a screen. It was taking a toll on my sanity, so I dragged my desk outside onto my deck, where a towering old oak tree offered enough protection from Austin's heat to survive. I might have looked silly sitting out there for half the day chugging ice water, but I loved it.
While the coffee brewed, I pulled my phone out to check the crypto-trading app Coinbase. Between coding sessions, I had started day-trading Dogecoin (DOGE), a cryptocurrency created in 2013 based on Bitcoin. Dogecoin was never meant to be a serious financial asset. Even the founders said it was a joke. But when the price of Bitcoin started climbing at the end of 2020, and people looked for the next hot cryptocurrency to bet on, Dogecoin started climbing as well.
For most of the currency's eight years in existence, one DOGE was worth a fraction of a cent. Then, in February 2021, the price reached a new high of five cents. Now, at the start of April, it was rising past six cents. I had bought some in January, when it started taking off, and had been holding it ever since. So far, it was the only thing I'd done that year that had made me any money.
Every day, when I woke up and saw that it had gone up, or at least not gone down by much, I had to answer the same question: Do I sell this, or do I keep holding on to it? I was up a few thousand dollars by then, and it was tempting to sell, but the pain of missing out on more money might be worse than the joy of cashing in on what I'd already made.
"Are you ready to go?" Cosette's voice brought me back to the present. She must have come downstairs while I was buried in my phone.
"Yeah, sorry, let's do it," I said and started leashing up the dogs. Cosette was a real estate agent and didn't need to leave to start showing houses until nine, giving us an hour to grab coffee. Our favorite spot, Velocity, was only a couple of blocks away and run by Johnny, one of our closest friends.
Once we left the house, Cosette asked, "Were you looking at your doggy coin again?"
"Maybe . . ." I smirked. "We're up again."
"So, you're gonna sell it?"
"Well, no, I didn't say that."
She laughed. "I don't know how you do that."
"Do what?"
"See it go up and not sell it. I'd be terrible at this. I'd want to sell as soon as I saw I made money." We stopped at the intersection, waiting to cross. "Are you excited for this afternoon?"
"Yeah," I said, stepping into the street. "I can't wait to see her."
"I bet she's a cute little tadpole," said Cosette.
"Our cute little tadpole," I said. "I can't believe it's already been three months."
We rounded the corner to Velocity and froze. Johnny was on his hands and knees crawling around on the ground in front of the order window, while Rose, his partner, paced back and forth on her phone, clearly agitated.
"Johnny, what happened?" I yelled as we started jogging towards the trailer.
"Keep the dogs back," Johnny called out. He had shards of glass carefully balanced in his hands, and I saw there was a larger pile on the steps in front of the shop below the shattered window of his café door.
"Again?" I asked him.
"Yeah," said Johnny. "Again." He tossed the glass in the trash and scanned the front steps for any remaining pieces. "I think you're good."
Cosette kept the dogs outside with Rose, and I followed Johnny inside the trailer to survey the damage.
"Lucky they left the prototypes," I said. Johnny was a mechanical engineer at heart and had spent the last year designing the best travel espresso maker money could buy. At $1,500, it seemed like an insane investment to me, but he had hundreds of coffee aficionados who had already preordered it and were eagerly awaiting its release.
"Yeah, probably too hard to pawn. They took all the tablets though."
"Think it was the same guy?"
Johnny nodded. He opened in 2019 and built a thriving community around the café. Then the COVID-19 pandemic nearly put him out of business. His online sales of coffee beans and espresso tools were doing well, but the café was barely scraping by. Worse yet, someone in the area had been breaking in every few weeks. He couldn't easily afford a surprise bill for new tablet computers.
"What're you gonna do?" I asked. "You can't keep letting this guy steal from you."
"I know," said Johnny, inspecting an espresso machine for damage, "but what I can do?"
"What about putting in more security? Or a gate? Booby traps?"
Johnny laughed, "Yeah, a gate and more security would be great, but I can't afford that."
"You could sell your DOGE," I said.
"Yeah . . . but I wanna let that ride," said Johnny. He'd been much more aggressive than me with his DOGE investment. I knew he was up almost twenty thousand dollars. He was making more from holding a joke cryptocurrency than he was from all his hard work at the café.
"We need to find the next Dogecoin," I said.
"Yeah, well, if you find any more free money, please let me know," Johnny said. "I don't know how much longer I can do this." He stared at his espresso machines. "Anyway, what can I get you?"
On the walk home, I couldn't get the idea of "the next Dogecoin" out of my head. Would other cryptocurrencies follow Dogecoin's meteoric growth the way Dogecoin was following Bitcoin?
It had happened before. When Bitcoin launched in 2009, very few people cared. For the first few years, one bitcoin (BTC) was worth almost nothing. In 2010, someone spent ten thousand bitcoins on two Papa John's pizzas. Curiosity grew, though, and eventually peaked with the first crypto mania in 2013-14, when Bitcoin hit $1,100 per BTC and spawned tons of copycats who wanted to cash in on its success.
If you caught the wave of that mania early, you could have made a fortune by finding out when a new cryptocurrency was going to launch, buying it early, then selling it as it took off. People made millions speculating on the Bitcoin copycats.
By the end of 2014, though, the mania was over. Bitcoin fell to a low of $172, most of the copycat cryptocurrencies died, and the public consensus was that the Bitcoin story was over.
But it came back. In 2017, the market took off again, this time sending Bitcoin to a peak price just shy of $20,000. Once again, as the fervor around Bitcoin increased, people started launching copycats.
The second wave of mania was even bigger and crazier than the first, but it, too, eventually died down. By the end of 2018, Bitcoin had lost 85 percent of its value from the peak and crashed to a low of around $3,000. Most of the copycats died off, and, once again, the popular sentiment was that crypto was dead, but for real this time.
Clearly crypto wasn't dead, though. Today, the ten thousand bitcoins spent on those two pizzas in 2010 are worth more than $300 million. In April 2021, Bitcoin was hitting new highs, and Dogecoin and the rest of the market was following suit. Tons of new cryptocurrencies were launching, and some were taking off. If the pattern continued from 2013 and 2017, I had a chance to make much more money. The trick was to find good information on what was launching.
We got back home, and Cosette left for work. I grabbed my laptop and walked out to my desk. What I needed was "alpha," insider knowledge about what was launching before it went public. I had no alpha, but I had a couple of ideas about where to get it.
I opened Twitter and clicked through to the accounts of friends I knew were involved in crypto. The first hadn't tweeted in two years. That made sense. He'd made millions and probably didn't want to use social media anymore.
Another, Caleb, had been working in marketing at the same time as me. We'd shared a few clients, and I'd even hired him for one project, so we knew each other, but I wasn't close with him. He was tweeting nonstop about crypto, but his tweets were mostly indecipherable jargon. He did seem to be making a significant amount of money, though.
Then I noticed he had a few tweets replying to a mutual friend, Quinn, another regular at Velocity. We'd known each other for years, and she had mentioned something about getting more involved in crypto the previous year during the drudgery of COVID lockdowns. At the time, I'd written it off as day trading and too risky to explore. Now, that seemed like a mistake. I mentally kicked myself for ignoring her for the last year. But maybe she'd be willing to help me now.
"Hey, Quinn," I texted her, "did you hear about Johnny?"
"Yeah, awful," she texted back. "He really needs a gate."
"Agreed. Listen, I wanna ask you about something else, too. You're involved in crypto stuff right?"
"Yeah, why?"
"Can I ask you about it sometime? Baby is coming in six months, and I'm trying to make some money before then." I bit my tongue and waited. I was basically asking her to tell me how to find free money.
"Sure, tomorrow morning at Velocity?"
"Done. See you at 9."
Finally, some good news. If Quinn knew how this new wave of crypto mania was working, this could be an incredible opportunity.
A few hours later, Cosette and I arrived at our ultrasound appointment. The technician rubbed the jelly on Cosette's stomach and started searching for our daughter, while we waited, squeezing each other's hands, hoping for the best.
Then we saw it . . . a tiny heartbeat appeared on the screen.
"Looks like you have a healthy baby girl," said the technician.
Cosette sniffled and squeezed my hand, and I leaned over to kiss her on the shoulder. Suddenly, it felt more real than ever. Our daughter was healthy, growing, and we had six months to get ready for her.
I really hoped Quinn had the alpha I needed.
Bitcoin 101
Before the speculative mania in cryptocurrency in 2021-22, there was the dot-com bubble of the late nineties and early 2000s. When that bubble burst, plenty of people said the internet was a fad, but they were wrong; the internet is a pretty big deal. Each time a cryptocurrency bubble has popped, crypto has been the subject of the same skepticism. The common assessment of crypto on the news or in books is that it is all one big, dumb fad, or a grift, and it's never going to turn into anything useful. But what if that's wrong? What if crypto is more than a manic casino?
Let's start with Bitcoin.
Bitcoin was launched in 2009 to create a "peer-to-peer electronic cash system," per the subtitle of the white paper attributed to Satoshi Nakamoto. The goal, according to the white paper, was to make it possible for anyone in the world to send money to anyone else without needing to go through a bank, money-transfer service, or even using a particular country's currency. If you live in a more developed nation and mostly send and receive money with other people in your country, you might think, "so what?" But cross-border money transfers had historically been extremely expensive and slow, making it hard for, say, an immigrant to send money back to their family.
It's worth lingering for a moment on that. Before Bitcoin, there was no way to move money around the world using the internet without going through a financial institution. You could give cash or gold to someone in person if you didn't want to use credit cards and bank transfers, but there was no way to make a similar kind of transaction digitally.
The store-of-value aspect of Bitcoin was initially more of a side benefit. The total number of bitcoins that can ever exist is capped at twenty-one million, so, as more people started using it as a way to move money and store some of their wealth, individual bitcoins went up in value due to scarcity. If your government routinely devalues your savings by printing money, a store of wealth with a fixed supply suddenly becomes very attractive, especially if you can store that currency digitally and easily access it anywhere in the world.
So, Bitcoin provides two compelling use cases besides speculation: It offers a digitally native currency you can send anywhere in the world without going through a financial institution, and it offers a way to store your wealth digitally in a form that, like gold, can't have its value destroyed by currency manipulation. The only way Bitcoin could have its value destroyed by currency manipulation is if the majority of people who own Bitcoin and maintain the Bitcoin network agreed to change the twenty-one million cap. So, a simple thought exercise should demonstrate why this hasn't and won't happen: If you could vote on the inflation rate for your currency, would you ask for more inflation?
