After a wild year that minted the most recent class of crypto nouveau riche, the price of bitcoin cratered to less than half of its November peak of $68,990 during a single weekend in January — a wipeout that sent just about every other digital token into the red, destroying with it more than $130 billion in 24 hours. There are few markets in the world that can go as haywire as those for cryptocurrencies, but the veteran traders who buy and sell them day in and day out have become desensitized. “My first reaction is, this is nothing,” Steve Armatas, trader at AlphaGrep Securities in Woodstock, New York, told me about the weekend when everything collapsed. “People notice it more because they’re losing money, because the market’s down 50 percent. That’s why it stands out. But it’s typical, it’s nothing unusual. This is what the cryptocurrency markets are.”
Bitcoin turned 13 years old in January, and at this point, it’s a given that cryptocurrencies can spike and crash in a flurry of anonymous hype and even outright frauds. (Unlike the stock or bond markets, investors can’t expect the government to bail them out or compensate them from getting defrauded, and there are no circuit breakers to keep things from crashing too far.) When I asked crypto traders about what caused bitcoin to fall so quickly this past weekend, most said it very well could have been triggered by concerns that the Federal Reserve will hike interest rates, or that Russia could invade Ukraine, but either way, there was an overriding sense of nihilism about the whole enterprise of assigning a direct cause between the physical world and the price of a digital currency, as if they’d resigned themselves to living in a random universe where meaning is absent and chaos is the only constant.
The always-extreme and always-on nature of the crypto markets has numbed the people who’ve made it their job to navigate the bubbles, scams, and randomness that have made these markets such a hostile environment. Take a look on Twitter or on Discord servers and you’ll still see the relentless optimism of the blockchain true believers, but now there are more memes about having to get a job working at McDonald’s, or posts detailing how someone lost everything they had. Whether it’s bravado or a coping mechanism, the professional crypto class say they hardly feel any of it anymore. “Of course, it’s never fun to see the price drop, but if you have been in crypto long enough, you realize that this is just the nature of these markets and you plan your trades accordingly,” Christos Krokides, trader at hedge fund ARK36, told Intelligencer. “So yes, I did get enough sleep.”
Traders are not the kind of people who tend to talk about their feelings to begin with, and the culture around cryptocurrencies makes them even more reticent: Fear can be minimized as FUD (“fear, uncertainty, doubt”). Those who’ve sold their assets can be disparaged as having “paper hands,” an epithet borrowed from the Reddit WallStreetBets crowd, contrasting with “diamond hand” true believers. To those who live through major swings, their feelings are beside the point. “The first time you experience something like this it’s extremely stressful, but it happens a few times and your nerve endings get burned off,” Jacob Eliosoff, managing partner at Trevi Digital Assets Fund, told me. Eliosoff had been a programmer on Wall Street previously, writing programs for Goldman Sachs’ credit derivatives business through the Great Recession, but still, he found the experience of trading digital currencies like bitcoin closer to the randomness of living through war. “Not to compare my experience to London in the Blitz, but just as a psychological phenomenon, when bombs start dropping for the first time, people freak out. It’s understandable. And those same people a year or two later, the bombs are still dropping, they just continue their conversations. These things stop having an effect. So part of it is just the psychology of experiencing a shock repeatedly.”
Massive collapses aren’t new to markets, and the memories of the last financial crises are still fresh in the minds of some who’ve invested into digital currencies. “I remember sitting in my law office in March [2008], and that’s when Bear Stearns went under. I remember looking at Google Finance, and it’s down 50 percent, and my jaw hit the floor,” said Stefan Coolican, a former investment banker who’s now the chief financial officer at Toronto hedge fund Ether Capital. Nobody would say how much money they’ve lost in the crypto crash, except to note that their accounts are far from where they were just a few months ago. “Definitely haven’t recouped the losses,” Coolican said of the recent turn, noting that some investments are still down by about 50 percent. “There’s been a slight bounce over the past day or so, but hardly enough to say we’re out of the woods.” Others say they’ve seen worse, particularly last May, when bitcoin dropped around $20,000 in value in ten days before rebounding. “In comparison, the current downtrend is much less steep,” Krokides said, adding that “we sold most of our assets and we are heavy on cash.” What these traders tell you is that, despite the money they may make or lose on a given day, what often keeps them in the market is an evangelical belief that this technology will revolutionize the world, and they’re willing to endure years, even decades, of volatility to see that bear out. “When you have these crashes, it hits you,” Coolican said. “You have to snap out of it a little bit. You have to say, this is a long-term thing. If you’re not prepared to hold it in the long term, then you should sell.”
There are structural differences between the daily life of a crypto trader and your garden-variety, Patagonia-vested stock-trading hedge-fund managers. Stock markets close, for one, letting people go home to families or blow off steam with their co-workers. Crypto never stops trading, warping people’s lives into a never-ending series of wins, losses, and missed opportunities. “There’s no break,” Coolican said. “Generally speaking, people in crypto are a little bit younger, and some of them, that’s all they do all day. I’m hearing more and more about people who are taking breaks from trading, taking breaks from Twitter, just to get their mental health back in order because that’s all they’re focused on. It’s all they think about, and it can become unhealthy.”
After bitcoin’s bad weekend, stock markets dropped by the most since 2020, only to swing back up. Then they did it again. When I asked a manager at a more traditional hedge fund what was going on, he told me, “Everyone is nervous, and when they’re nervous, they run to the hills, get cash and become liquid.” Although there’s always a degree of randomness in any market, the reason behind any stock’s drop can usually be connected to changes in the economy, or how quickly the Fed is going to raise interest rates, or a quarterly earnings report. So the degree to which crypto traders have given themselves up to randomness is striking. “It’s certainly true that the randomness is exaggerated in crypto, like many other things are exaggerated in crypto,” Eliosoff said. Armatas of AlphaGrep Securities, who analyzes data like trading volume to predict the price of digital currencies, was even more blasé. “My honest opinion is nobody knows,” he said. “So I think if anybody tells you why, they don’t know.”
Since bitcoin’s rough weekend, when it fell below $33,000, the digital currency has recovered somewhat. With it, some other tokens have followed, leading to a renewed sense of optimism on Reddit boards and Discord channels, where some traders now brag about how they bought at the bottom of the crash. For some traders, like Armatas, the surge in market chaos is good for business, since he relies on algorithms for trading and is always searching for new clues about when are the best times to trade. “Here’s a trading signal that I bet would make a lot of money. Whenever 90 percent of the Reddit posts mention diamond hands, it’s a sell signal. Whenever 90 percent of the posts mention McDonald’s, it’s a buy signal,” Armatas told me. “Even the fact that you are doing this kind of article now is probably a buy signal.”
