What It’s Like to (Almost) Become a Cryptocurrency Millionaire

What It’s Like to (Almost) Become a Cryptocurrency Millionaire

What It’s Like to (Almost) Become a Cryptocurrency Millionaire

What to know about the crypto-craze before it implodes.

It’s a lazy Sunday morning away from my family, I’m sitting in a hotel room in Montreal, and I’ve got $160,000 in my pocket. Or, rather, my “pocket.”

I’m staying in the neighborhood known locally as the McGill Ghetto, thanks to its proximity to the city’s famous university. My room is large — with a kitchen and living area — but not fancy.

The money is tied up in cryptocurrency — and I’m not ready to cash out.

With a few mouse clicks, I could liquidate my positions and transfer the proceeds (minus fees) into my bank account overnight. After paying capital gains tax, I’d have six figures in legally earned legal tender.

But here’s the rub: Twenty-four hours earlier, my portfolio was worth less than $80,000. Overnight, one particular cryptocurrency — a low-cap privacy coin called Verge — caught fire with the Asian markets. By the same time tomorrow, that $80,000 might evaporate. Or it may double again.

Welcome to the wild world of cryptocurrency, an impossibly young global financial market that runs 24 hours a day, seven days a week. Especially in recent months, the media has become feverish over bitcoin, ethereum, and Initial Coin Offerings, as breathless reporters publish stories of college seniors turned millionaires thanks to tiny investments made during their freshman years.

The reality is far less romantic. For every 1,000-times windfall, thousands more investments have gone south, wiping out trading accounts and nest eggs. As a bitcoin enthusiast since 2013 and casual crypto trader since 2015, I’ve had my share of euphoric wins and heart-crushing losses.

But I’m also a grown man with a family — I don’t Google sports cars when I’m ahead; my dreams involve 529 plans and down payments.

And yet, I’m just as susceptible to wide-eyed greed. Sitting in my hotel room in Montreal, I could have cashed out at $160,000, pocketing enough to cross “college funds” off my to-do list. I could have cashed out, returned to Brooklyn with the better part of a down payment in hand. Instead, I told myself, that half-penny coin has more room to run.

“Forget down payment,” I thought, watching 0.5 cent turn into 0.6 cent on my phone, translating to another $16,000 gain. “Let’s go brownstone shopping with cash.”

That’s not how this story ends, of course. It’s true that a well-placed $3,000 can become $160,000 seemingly overnight. But, as many are learning the hard way, every crypto investment can just as easily evaporate in the time it takes to hit “refresh.”

Bitcoin was created in 2009 by the pseudonymous Satoshi Nakamoto, by all accounts a pioneering genius in the field of computational cryptography. His invention was meant to be used as an unhackable, untraceable currency operating beyond government oversight. Though bitcoin tickled the dreams of many technolibertarians who’d long wanted the internet to function as a utopian digital space, it’s another of Nakamoto’s innovations that gave rise to the cryptocurrency revolution: encrypted, decentralized networking.

The particular way that Nakamoto achieved that is a little complicated, but put as simply as possible, bitcoin runs on a network with no central server. Rather, it’s a network of computers, called miners, that work both collaboratively and competitively. Before any bitcoin transaction is made, it must be validated and confirmed by a consensus of these computers. This decentralization was bitcoin’s true innovation. It’s given rise not only to 1,300 bitcoin clones and descendants, but an entirely new industrial sector known as blockchain technology.

Within a few years of its launch in 2009, bitcoin became less important as a currency than as a commodity, not unlike gold. You can still buy things with bitcoin (and gold, too, for that matter, sort of), but it’s become an investment vehicle for most buyers. Why invest in a virtual currency with no “real” value? Because $2 spent on bitcoin in December 2011 is today worth more than $18,000 — and many believe that bitcoin’s highest prices are yet to come.

At the same time, the clones, knockoffs, and descendants arrived.

Because bitcoin is open-source, anyone can copy, modify, and redeploy its source code for their own purposes. That’s precisely what happened, starting with the introduction of Namecoin ($NMC), a bitcoin offshoot, in 2011. Since then, more than 1,300 new cryptocurrencies have been launched; most, but not all, are traded freely on various cryptocurrency exchange platforms.

By | 2018-03-02T10:32:37+00:00 June 8th, 2017|Uncategorized|1 Comment

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