Yesterday, as cryptocurrency prices crashed and many lost their shirts and asses due to overleveraging, Celsius Network, a loan platform for cryptocurrency, chose to pause all withdrawals, swaps, or transfers between accounts, citing “extreme market conditions.” To be clear, this means that billions of dollars of funds are being held hostage on a non-specific timeline by a company that several people have suggested may not have the liquidity to handle a full withdrawal of funds. It’s a bit like if you went to a bank and put money in there, but there was a rough day on the stock market, so now your debit card doesn’t work, and you can’t transfer money to anyone.
Binance, one of the largest cryptocurrency exchanges, also paused withdrawals of Bitcoin, citing a “stuck transaction,” a hold that lasted for three hours. In the last 48 hours, I’ve watched Bitcoin crumble from just under $25,000 on Monday to just over $21,000 as I write this – a number I’ll likely update multiple times before I finish writing this – and people are despairing. The Celsius Network subreddit includes some of the more depressing posts I’ve ever read, with users saying stuff like “they can legally just steal all our money?” and “Fuckfuckfuck” and “Bruh I was gonna exit today too RIP.” Crypto.com and BlockFi have both announced layoffs, and Coinbase retracted hundreds of job offers from people who had agreed to them, including at least one person who needed it for a visa.
What we are seeing is a connection between actions, consequences, ignorance and hubris. This crash – to whatever extent it continues – may end up damaging many millions more lives than the ones in 2017/2018 simply because more people have been exposed to crypto through hucksters and celebrities telling them this was the future. And just like the rest of the startup world, the crypto industry massively overhired to deal with the rush of new money and excitement in the industry, with clearly no strategy to prepare for the thing that crypto is best known for – crashing.
The way in which Coinbase and other major cryptocurrency companies have acted in the last year (and one might argue for their entire existence) has been nakedly exploitative and reckless. Coinbase, for all Brian Armstrong’s bloviating about “being a mission-focused company,” clearly only had one mission – creating as many transactions on Coinbase as possible within the time when people were still excited about cryptocurrency, customer safety and worker happiness be damned. And, of course, they laid off 1100 people, a few months after spending $14 million on a Super Bowl ad. Coinbase CEO Armstrong claimed that this was a “difficult decision.”
Companies like BlockFi and Celsius grew by offering unrealistic, ponzi scheme-adjacent “returns” on your cryptocurrency, recklessly conning people into believing that 5% in returns on crypto was just as stable, reliable and trustworthy as a regular certificate of deposit. Crypto.com spent $700 million on rebranding Staples center, $65 million on an ad campaign with Matt Damon, and then laid off 260 people a few months later.
The cryptocurrency industry has managed to exploit not only regular people that desperately want a leg up in life, but also drain endless tech talent that believes that all of this was the “future of the internet.” Every single braindead charlatan claiming that this was “like the early days of the internet” was simply using a euphemism for another euphemism – “get in on the ground floor”- that was and is entirely used by people that want to con people into joining a corrupt, exploitative system.
And all of this was inevitable, because the stewards of this industry have built it to run by having the candle burn at both ends. Brian Armstrong made a quick $1.2 billion selling stock, CZ of Binance is worth tens of billions, and the disgraceful riverboat twins the Winklevosses are worth over $4 billion themselves. Don Kwon of Terra is worth billions, despite overseeing one of the stupidest ideas for a project of all time. These people are naturally insulated from the consequences of their actions, meaning that they can hire aggressively, advertise aggressively, and then discard those workers that they don’t need the moment that there’s a downturn.
These companies are unsustainable by design, created to extract and exploit capital and labor with little regard for the human cost, enriching the people at the very top in the process. They seem incapable of creating any kind of steady equilibrium, oscillating between laying people off and rapidly hiring (Coinbase planned 2000+ hires in 2022!) based on the state of the market. Coinbase in particular, but honestly most crypto exchange companies (and many crypto companies in general) are reactionaries rather than builders, creating organizations that fail to prepare for the inevitability of a bear market and fail to appropriately staff even within a bull market.
As I’ve remarked before, so much of this industry is built on conning people into believing it’s the future, then extracting something from them – or convincing them to join the con and trick people into joining too. And instead of creating something real, something with meaning and structure, the cryptocurrency industry – even at the biggest companies – seems utterly incapable or unwilling to act in a way that isn’t usurious. There is no other way to describe an industry that seems blindsided by the volatility of cryptocurrency at every turn, having either too many people or not enough people to run the business properly. Coinbase can’t even field a decent customer support experience, despite having a market cap above $11 billion.
I am, at this point, I think anyone is silly to predict things with confidence, but something about the series of events that led to this crash is making me fear that this is another big one, or at the very least Bitcoin is not done bleeding. The combination of an oncoming recession, the crash of Terra’s stablecoin, mass layoffs, the NFT market crumbling, Axie Infinity’s fall from grace – all of this was timed perfectly to coincide with a massive influx of new users due to high prices and huge amounts of advertising.
Consider for a second how many of these events happened after the Super Bowl, and how, for many people, their introduction to cryptocurrency was when one Bitcoin was $42,000, with a brief peak at the end of March of around $47,000. Millions of new marks were conned into joining a system rigged against them, imagining that the good times would never end, that Bitcoin would continue to go up, and that they were going to be wealthy. They were given hope at a time when a pandemi2c had shown the vast inequities of society, thinking that for once they’d finally beat the system, only for a new system to exploit them.
There is a decent chance that we may be about to see another 2017/2018-esque crash, because the consumer and institutional money is scared, and there is little good news to share. The total lack of any meaningful cryptocurrency product means that there is no utility to point to, and the attempt to legitimize cryptocurrency by making it some sort of cool art-driven thing has totally and utterly failed. And at a time when cryptocurrencies are painfully struggling in a very public way, there are few that one can use to articulate why any of this is worth anything.
It is, however, unlikely to die if there’s a crash, but that is not my point. We will see this cycle repeat again and again – the crash, the layoffs, the losses and the “difficult decisions” from people who aren’t affected by them. What won’t be discussed enough is how many millions of people were conned into joining a volatile system, one controlled by a mixture of anonymous market manipulators and craven executives that don’t care for their customers or workers other than what they can extract from them.
Cryptocurrency has become exactly the monster that it claimed it would slay – a crooked, kleptocratic cesspool of questionable laws, where the people in power keep their place regardless of how many irresponsible and despicable acts they commit. Cryptocurrency is not “for the people,” nor is it freeing anyone from the financial system – in fact, one might say that cryptocurrency in the last few months resembles the subprime mortgage crisis where people were told they had a chance at accumulating wealth without adequate warning about what they were getting into.
There is not enough ire in the world for the influencers – the Anthony Pomplianos of the world – who have crammed this poison down many young people’s throats, knowing full well this was an inevitable end for them. Every one of these people is guilty of tricking ignorant people into trying to catch knives, claiming again and again that there is method to the madness of a cryptocurrency market full of fake volume and other forms of intentional manipulation.
If there is any justice, this will be the point at which the government regulates cryptocurrencies – I think I’ve said this before – but I’m worried that not enough is happening to stop consumers being conned. I worry for the millions of people that have seen their balances halved (or worse) – the people who were excited to finally be on the winning team who are now suffering because they are very much losing.
The world has become so deeply inequitable, and it has become so deeply difficult to accumulate wealth, and even the most noxious crypto bro is likely doing this out of a sense of desperation – a sense that there is no honest way to become one of the elite, and thus involving yourself in this questionable, amoral system is necessary to progress.