Headlines have been dominated by financial news lately, and you may have noticed everyone on your timeline is channeling their inner CNBC analyst. But what exactly is going on? If you’re like me, you may have seen that Redditors made big money off GameStop stock, and that everyone is talking about dogecoin, but you might not know the ins and outs of either story (or what cryptocurrency even is and why so many rappers are getting involved). That’s when it’s best to know what you don’t know and do some research.
NerdWallet calls cryptocurrency “a digital currency that can be used to buy goods and services, but uses an online ledger with strong cryptography to secure online transactions.” One can turn their dollars into crypto on any one of a slew of apps, or invest via their own wallet, with each dollar representing a fraction of a particular coin. Like stocks, crypto is worth more or less at any given time based on industry demand. Bitcoin (or BTC) is the most popular cryptocurrency, but there are others like ethereum, litecoin, ripple, NEO, or dogecoin, the hot currency that’s currently valued at $9 billion thanks to the hype train led by Elon Musk and Snoop Dogg.
“[Billy Markus] famously sold all of his dogecoin a long time ago,” reflects Jack Platts, co-founder of Hypersphere, an asset manager in the cryptocurrency space. “He made it as a meme to be ironic about how anyone can make these cryptocurrencies. And now, yeah,” he says incredulously.
Platts started investing in bitcoin during the first crypto boom in 2013, and attributes the current craze to a “confluence” of factors, including a wild pack of Redditors: “The first and biggest [factor] that affects all assets is the central banks and national government’s response to the COVID-19 crisis. When the pandemic got going, and they started to make shutdowns, the markets panicked, and people sold. So the central banks and the governments all came together and said, ‘Hey, we need to fix this.’”
He explains that the Federal Reserve started buying “billions of dollars of bonds to make it easier for banks to lend money to each other.” Other factors included the two stimulus checks that the American people received, and the boredom of quarantine that led individual investors to conspire on Reddit.
“So long as they keep injecting trillions of dollars more into the system, you’re going to continue to see people trying to find a home for that money,” Platts says. “Some of it is going to go to people that need it. But a lot of it’s not, it’s just going to go to people who invest in assets.”
Though there’s mass unemployment and an impending eviction crisis, some people are making too much money, and as Platts explains, looking to “transport money to the future that isn’t worth less than it is now.”
Among the people looking to get into crypto are rappers like Meek Mill, who recently called for more people to invest. His Twitter plea came two months after Lil Yachty started his own coin, joining the likes of Ghostface Killah and Akon. While starting a coin and stirring demand could make for a nice “pump-and-dump” opportunity, Platts says that these coins often fail over time because they have no function.
“Unless Gap or Apple is accepting dogecoin, what the fuck are you going to do with these dogecoins?” he says. For now, these types of coins, which are trending but often less functional, make sense for people looking to buy low then sell off to get a huge return after demand raises value.
There’s more long-term viability with other crypto coins. NerdWallet reported that as of late January, the total value of cryptocurrency is equivalent to $897.3 billion, with $563.8 billion of that being bitcoin, the most popular cryptocurrency. Platts recommends that people take $10 to $100 that they wouldn’t mind potentially losing, then putting it in an app such as Coinbase, Gemini, or…