Following January’s quasi-activist pump and dump of GameStop, led by Redditors, cryptocurrency traders seemed to take on the challenge of one-upping them. The world of cryptocurrency is always in some kind of massive upheaval—the market is not known for having quiet days—but at the moment, it’s on an incredible bull run. Prices are climbing, even with the dips. In February and March, non-fungible tokens, or NFTs, which are created using technology based on the Ethereum cryptocurrency, became a household name—at least in some households—following the online artist Beeple’s using one to sell a piece of his digital art for $6.9 million. Now, even Rob Gronkowski is selling them.
Then, just last week, Coinbase, one of the most popular cryptocurrency trading platforms in the United States, went public via a direct listing. Its stock soared 50 percent on the first day. At one point, it was worth $100 billion. For many in the cryptocurrency community, this was, as The New York Times recently described it, a “cryptocurrency coming-out party.” Coinbase, exploding with new users, is now effectively the face of consumer crypto trading.
Yet, even as Coinbase was becoming the crypto hero of Wall Street, dogecoin—a joke cryptocurrency semi-ironically embraced by Tesla founder Elon Musk—started pumping. It had climbed as high as 340 percent by the end of last week and is now the fourth biggest crypto coin at the moment.
Traders who have been at it since 2009 may roll their eyes, but after the last few months, there shouldn’t be any sort of question about whether cryptocurrency is here to stay. What is less clear, however, is what the current crypto cultural explosion will mean for how we think about the very nature of money. Simply put, though cryptocurrency seems ready to take over the world, the world isn’t quite ready to make the big switch. And this kind of environment, where seasoned traders know what’s going on, but millions of new users are being exposed to cryptocurrency for the very first time, could be disastrous—and it seems like things are already beginning to sour.
Cryptocurrency is the umbrella term for digital money that is created via a technology called the blockchain. To put it as simply as possible, blockchain technology is a big series of puzzles. Computers from all over the world work together to solve these incredibly complex puzzles, and, each time they do, the next puzzle in the sequence gets harder to solve. If, at any point, someone wants to change the kind of puzzle being solved, they create a new branch, with its own sequence of puzzles. These branches are commonly referred to as “altcoins.” This is the difference between, say, Bitcoin (the original puzzle) and something like Ethereum (the second most popular puzzle). Got it? There are currently over 6000 different cryptocurrencies, all with different properties and valuations.
For crypto enthusiasts, the technology offers a way to shield a person’s wealth from the control of governments or huge corporate bankers. For its detractors, it’s a fun way to kill the earth while you launder money.
But the moral grayness of the crypto market hasn’t slowed down the frenzy around it. And in this absolutely chaotic and anarchic world of high-stakes digital trading, things can get confusing fast—particularly if you’re a brand-new trader using Coinbase for the first time. Though the app is ushering in a new age of consumer-friendly cryptocurrency exchanges, among seasoned traders the platform is widely known for its suspicious down times, expensive and confusing fees, and a reputation for trying to assert control over a market that prides itself on decentralization. Simply put: Crypto traders who know what they’re doing aren’t using Coinbase. And even with all the celebration around Coinbase from the crypto world right now, Coinbase’s subreddit is a terrifying place to visit.
For those who have never opened up a cryptocurrency exchange before, many of them work the same way as a stock or foreign exchange trading app. You’re greeted with a list of trending currencies and a bevy of purchasing options. Coinbase, however, has a few features that make it both very easy for first-time traders to use and create a very convenient environment to lose a lot of money in. Coinbase shows customers an aggregate price—and then charges them a not-immediately apparent spread to cover the difference between the price shown and actual real-time listings.
To access actual real-time prices and set specific price orders, users have to use Coinbase Pro, which is a completely different app that used to be called GDAX before it was rebranded as a “pro” option in 2018. The difference between the two apps is vast, and especially when it comes to fees. Coinbase charges fees as high as 4.5 percent per transaction depending on what you’re doing—and that is before counting the spread charges.
Coinbase is also notorious for its unresponsive customer service. There are numerous horror stories about users being locked out of their accounts with no way to get back into them. All of this creates a situation where first-time traders following stock market buzz are being led to an app that might not exactly be ready for this kind of attention.
Long-time crypto trader Alana Joy told The Nation that it’s not uncommon for first-time traders to ask her about Coinbase. She regularly advises against it. Joy runs a crypto trading community for women called FLIP: Financial Liberation Is Power.
“I have girls in my group,” she said. “They ask, what about Coinbase? And I say, ‘If you want to use Coinbase by all means do that, but here’s why you shouldn’t.’” Like most of the crypto community right now, Joy is enthusiastic about Coinbase’s massive valuation and huge early success on the public market this week. But Joy also brought up the infamous Coinbase outages.
In fact, everyone I spoke to for this piece brought them up. I’ve also personally experienced them. Like many first-time crypto traders, when I first began trading, I downloaded Coinbase, which is touted all over the web as the easiest app to use. But especially when the bitcoin market is surging upward or going into free fall, Coinbase will freeze up, blocking its users from being able to sell any of their assets. Sites like Twitter and Reddit are awash in paranoid posts full of conspiracy theories about whether this consistent downtime is deliberate.
Beyond the influx of users flocking to Coinbase, Joy has other worries regarding this brave new world of consumer-level crypto trading—namely, dogecoin. The joke coin based on the famous meme of a shiba inu isn’t supported by Coinbase, but is supported by other exchanges like Blockfolio.
“When the GameStop situation was happening what I really loved about that situation was the point behind it,” she said. “Then the next week there are all these people in my stream going, ‘Oh, doge is the next GameStop.’”
Wild fluctuations of dogecoin have been going on fairly consistently since January, thanks to, in large part, Elon Musk and Mark Cuban. Musk continues to tweet memes about dogecoin, sending its valuation through the roof every time. And Cuban, who is all in on dogecoin, recently told CNBC that he thinks the current surge of the joke cryptocurrency is a great idea, though he admitted he has no idea what it means. “A pump and dump of dogecoin, there is no greater point to prove,” Joy said.
Joy said she’d seen more than a few users on social media begging Musk to tweet about dogecoin again so they can get in on the next pump. “It was really sad. There was this woman who was like, ‘Please tweet about it again, I put everything I had into it.’”
Which gets to a key problem that many first-time traders are discovering right now. Cryptocurrencies don’t move like traditional stocks; they’re temperamental—and some coins are highly susceptible to hype. For instance, those NFTs that were worth hundreds of thousands of dollars last month? Some of them are worth a fraction of that now.
“Doge is one of my favorite cryptocurrencies of all time—it is fun, historically predictable, easy to profit from, and embodies some of the most popular characteristics of the crypto space. That said, its present price action is irrational and based largely on speculation and fear of missing out, and not on any fundamental increase in value or use case,” Scott Melker, a prominent crypto podcaster, told The Nation. “Like any other asset that rises fast in price with no fundamental reason, many late investors, at some point, will likely be left holding the bag [with] a significant loss.”
Melker sees a trend happening among digital financial services right now starting with the GameStop pump in January and the NFT boom in February and March.
“I think in general, we’re just seeing a macro transition into digital everything. Art? Sure, why not trading? Why not?” he said. He also pointed out that it’s probably not an accident that this boom around digital currency happened during the coronavirus pandemic. “No sports to bet on, nothing to do, free [stimulus] money, Dave Portnoy livestreaming himself day trading stocks.”
But it’s hard not to feel worried looking at social media. Even 4chan users are beginning to wonder if Musk is using dogecoin to dupe consumers into huge losses for his own personal gain. And on Reddit, users are warning each other of altcoin-based scams, where sock puppet accounts seem to appear out of nowhere, all promoting the same worthless crypto coins. Most troubling of all, over the weekend Reddit users reported seeing a video of an r/dogecoin user threatening to kill himself on camera. In the video, which is no longer available on the subreddit, the user put a gun to his head and ranted about dogecoin’s inflated valuation.
Alex Gladstein, the chief strategy officer for the Human Rights Foundation, and a bitcoin evangelist, has been thinking about what this new age of cryptocurrency mainstream acceptance tells us about who is in control and who is not. Gladstein wonders whether you can make cryptocurrency easy to buy and sell without giving up all control to huge corporations and governments. “At the end of the day, [Coinbase] is part of the establishment,” he told The Nation. “They’ve shown themselves to be a partner in the surveillance state.”
He said that there are many more Coinbases on the horizon because people are attracted to centralized services. And dogecoin is a great example of this increasingly tumultuous battle over who controls cryptocurrency. Gladstein warned that people should be wary of buying dogecoin.
“I’d say people should be careful. It’s a dead software project that a small group of people are manipulating,” he said. “It’s important to remember that these are playthings of a handful of insiders. The value of bitcoin, on the other hand, is that it’s not controlled by insiders and that it provides actual value to many and that it has bubbles and crashed many times only to keep rising higher. Do not conflate the two.”
But we’re only at the beginning of all this. NFTs, Coinbase spreads, doge pumps—things are only going to get more confusing and strange as the Internet creates new and bizarre ways for us to interact with our financial markets.
In fact, dogecoin isn’t done pumping. Today, April 20—the unofficial national weed holiday—doge enthusiasts intend on trying to pump it as high as they can to celebrate Doge Day.
Why? Because it’s funny.