From City-Journal Magazine, Autumn 2022 edition:
In early 2022, a video-essay creator named Dan Olson uploaded a two-hour-long exposé to YouTube. “Line Goes Up—the Problem with NFTs” quickly became a viral sensation, accumulating nearly 9 million views as of August—an incredible number for a seemingly niche topic. (The acronym “NFT” stands for “non-fungible token,” the name of a very small subset of the still fairly obscure online cryptocurrency system.)
Olson had done his homework. The video begins with the real-estate crash of 2008, tracing not only how that crisis was allowed to happen but also the social and economic consequences that followed. From there, Olson explores the early days of the first cryptocurrency, Bitcoin, and its various features, promises, and problems. Olson moves on from Bitcoin to other digital currencies, such as Ethereum, but he wants to make a larger point than just identifying the idiosyncrasies and flaws of these technologies—he is interested in the social implications of “crypto” hype. The crypto world, according to Olson, is filled not only with hype but also with professional scammers, broken promises, predatory and antisocial behavior, desperation, greed—and rage. Rage at how the post-2008 world had turned out, rage at how the American dream doesn’t seem attainable anymore, rage at whomever and whatever could be blamed for robbing the people inside that online world of what they felt they were owed.
Less than half a year after Olson’s video appeared, TerraUSD, the biggest so-called stablecoin (a cryptocurrency intended to maintain a price peg to another asset, often a national currency), crashed overnight. The value of Terra plummeted to essentially zero, which, in turn, delivered a massive shock to the entire cryptocurrency ecosystem, slashing the total market cap of crypto in half. Many people lost their savings. Amid the financial carnage, the feelings of anger deepened. A world that promised financial salvation to the savvy and the elect turned out to be just another mirage, ending up with a few big winners and many, many losers. Rather than replace a broken and corrupt post-2008 economy, crypto appeared only to replicate its worst aspects.
Olson’s essay is available for free on YouTube, and it contains a treasure trove of information about the technical details, as well as the practical history, of cryptocurrencies. It’s a rich account, but one aspect of it deserves special elaboration: Olson’s characterization of the social environment of the online chatrooms, forums, Discord servers, and newsletters of the cryptocurrency universe. Crypto, it turns out, is not unique. The intense online world centered on digital currencies that Olson explores—evoking a curious mixture of hope, insecurity, desperation, fear, joy, and anger, and holding out promises of personal meaning and financial salvation—is today just one among many online. From radical feminism and anti–seed oil activism to neopaganism and “esoteric” online racism, the Internet today is full of strange new quasi-faiths, many offering competing narratives of what went wrong after 2008, each offering a secret knowledge—a gnosis—through which an enlightened few can hope to escape and purify themselves.
Indeed, one of the under-explored effects of the great financial crisis of 2008 and the subsequent collapse of Western society’s model sequence for attaining professional success and social esteem (go to college, study hard, get a well-paying job, form a family) has been a privatization of meaning among younger millennials and members of Generation Z. It’s broadly accepted today that many in the younger generation face a future where they will be materially poorer and less professionally secure than their parents and grandparents. Such monumental shifts in economic reality invariably produce dramatic shifts in people’s social reality, as old expectations and beliefs no longer match up with the way things are. In earlier eras of American history, major crises, as well as the ideological and religious revivals that often followed them, played out in streets, churches, tent meetings, and lodges. Now the process takes shape primarily online, where the new Gnostics preach.
According to Olson, the average profile of someone inside the more speculative part of the crypto boom was as follows: middle class, but downwardly mobile, with a susceptibility to the confidence tricks and fraud endemic to the crypto market, stemming largely from unfamiliarity with the actual economy, the challenges of running a business, and so on. With just enough money to be able to invest, but not enough experience or sense to avoid crypto scams, these people tended to exhibit the unstable emotional mix of hope, confusion, and righteous fury that Olson identifies.
The slang language of these online crypto environments includes terms such as “rug-pulls”—that is, crypto projects that take the money and run. Yet indignation over how often this seems to happen is accompanied by a sort of blithe acceptance that, yes, someone is getting ripped off; it just shouldn’t be me. As Olson points out, advertisement for “pump-and-dump” schemes is done in the open, and not particularly frowned upon; often, the people taking these chances to scam others find out that they were actually recruited into the “dump” part of the swindle, not the “pump.” Further, at the most basic level, the big hope for a payday (for a cryptocurrency coin to blast “to the moon”) is that the coin suffers from massive deflation. In the real world, deflation can often be catastrophic, of course, but in crypto, it is often a well-advertised feature, not a bug. Sure, if everyone adopted Bitcoin and the inability of the currency to expand produced an economic disaster, that would be bad overall, but at least those who got in on it early would be rewarded....
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