On August 11, 2021, a USA Today article featured the headline, “Millennials are quitting jobs to become crypto day traders.”
The image at the top of the piece depicted Benjamin Franklin wearing dark sunglasses. A money tree enveloped in storm clouds was Photoshopped onto his right shoulder. A bald eagle descended through lightning to pluck a hundred dollar bill from the top.
The piece began with Jessica Menton documenting the story of Hamez Trezhnjeva, a 27-year-old Albanian immigrant who left a Manhattan bartending job to “spend more time trading on his phone.”
Trezhnjeva was “frustrated” that his restaurant gig paid a fraction of what he earned before being laid off during the pandemic, and according to Menton, he became “enthralled” with “stocks and Dogecoin.”
Trezhnjeva’s story, embellished or not, is a microcosm of a larger dynamic that’s all too real. Over the past two years, many young adults in America decided that day-trading or otherwise dabbling in crypto-related assets was preferable to low-paying wage work. Lured by tales of overnight riches, untold scores of twenty- and thirtysomethings braved a new frontier: The decentralized web, built on the Ethereum blockchain, where turning $500 to $500,000 could be as simple as signing up for the right “mint,” the process by which NFTs are born.
This wasn’t confined to “trading,” per se. Earlier this year, over the course of three months, I spoke to more than a half-dozen photographers participating in a booming market for photography NFTs — tokenized jpegs which typically sold for a minimum of 0.1 “ETH,” the Ethereum equivalent of $300 at the time. In some cases, the digital images sold for 100, or even 1,000, times that much. At least two of the artists I spoke with quit their jobs.
In “Three Months In Web3: What I Learned,” I documented the astounding tale of Isaac Wright, better known as “Drift,” whose work first landed the Army veteran in a jail cell before ultimately vaulting him to semi-stardom on the way to Sotheby’s. In that linked article, I wrote, of Wright and those he inspired,
It’s obvious why someone would pay $50,000 for one of Wright’s photos, assuming the work comes with some authenticating trait, be it the NFT provenance or, for a physical print, his signature. He embarks on death-defying climbs to capture surreal panoramas. Often, the work is compositionally flawless, although I’m not sure even he realizes it. It’s possible the work is still undervalued, even after a 12-month run more dizzying than one of the balancing acts that made him famous. On the other hand, it’s not obvious why anyone would pay $5,000 for a picture some random person took of a palm tree.
It may be wholly viable (indeed, it might be wholly advisable) for someone with a sizable following to quit a $40,000 per year day job to sell photography NFTs with Ethereum at $3,000. After all, you only have to sell 15 of them in a year at 1 ETH each (not a particularly tall order) to be financially better off. If you incorporate yourself, you’ll get better tax treatment too, and you’ll be able to deduct your cameras, film, etc. If Ethereum goes from $3,000 to $10,000, you’re a genius. If it goes to $64,000, like Bitcoin did, you’re a visionary. If, however, it goes to $300, you’re broke. You’ll be selling your work for 10 times less and demand will crater as sentiment for crypto assets deteriorates. You’ll also owe taxes, in dollars, for any Ethereum proceeds you cashed in to pay your bills. Again: It’s all dangerously self-referential.
Less than two months later, the adverse scenario is unfolding. Notwithstanding a fledging rebound, cryptocurrencies collapsed this week, when the failure of a popular stablecoin conspired with generalized market angst to undermine sentiment.
Ethereum is holding its ground. Sort of. It’s still worth enough to make NFT sales viable, assuming you can can find buyers. But with sentiment impaired, that’s the furthest thing from a safe assumption. “We are all hurting this week,” wrote Cozomo de’ Medici, a pseudonym adopted by Snoop Dogg, who recently amassed one of the world’s most expensive collections of NFT art. “If you haven’t been personally crushed by the markets, we all have a fren who has,” the latest installment of “Medici Minutes,” a newsletter, said. (“Fren” is Web3 speak for “friend.”)
Underlying all of this is a sobering reality. Not everyone can be rich. If everyone’s rich, no one is. The economy needs bartenders. The economy needs grocery store clerks. The economy needs baristas. The economy needs IT workers. The economy needs lighting experts to work in the fixture aisle at Home Depot. And on and on.
Without those workers, businesses can’t fill open positions. When business owners become desperate, they’re forced to offer higher wages. Which is a good thing. Until it’s not. Small businesses, which account for nearly half of all private sector employment in America, shed 120,000 jobs in April, the latest data from ADP showed. One problem: They’re unable to compete for the workers they need. The April vintage of NFIB’s survey of small business optimism underscored the point. “The labor supply is not responding strongly to small businesses’ high wage offers,” NFIB Chief Economist Bill Dunkelberg remarked.
If small businesses can’t afford to fill open positions, or can’t source enough qualified workers because they (small firms) are being outcompeted by giant corporations with deep pockets, they’ll be forced to close the doors. Initially, the lost job openings will help normalize the labor market, a welcome development. But the economy will need those jobs down the road. In many cases, small businesses which close their doors are gone forever.
In the meantime, intense competition for scarce workers and the wage inflation it begets, threatens to embed a wage-price spiral in the economy. Despite the hottest wage growth in decades, pay increases aren’t keeping pace with inflation. That isn’t lost on workers. They’re demanding more raises in order to bring their pay in line with the rising cost of basic necessities.
This isn’t some far-fetched, doomsday scenario. It’s happening right now, in the world’s largest economy. And one culprit is the pipe dream that the decentralized web is a place where everyone can become rich.
That dream is falling apart on its own courtesy of the collapse in cryptocurrencies. But it would’ve come undone anyway. Because the dearth of labor precipitated, in part, by too many young adults chasing “dreams” was (and still is) contributing to ruinous inflation which, one way or another, will dead-end in a recession. It always does.
None of the above is to suggest people shouldn’t “follow their dreams,” whatever that means. What it is to suggest, though, is that the road to turning one’s dreams to riches is almost never smooth. In most cases, it’s not even paved, let alone marked. For example, Isaac Wright’s path to NFT millions took him to war, to the top of skyscrapers, to jail, then back to skyscrapers.
I described the reality that everyone can’t be rich as “sobering.” In some ways, it’s also maddening, or at least as it manifests in American-style capitalism.
Why shouldn’t every photographer be able to sell their work for millions? Why should baristas occupy the bottom tier of the social pyramid when the caffeinated beverages they serve power the creativity of the people who sit at the top? Why does someone who analyzes blips and basis points on a Bloomberg terminal make 20 times more than someone who builds bridges? How is any of that equitable or fair?
The truth is, it’s not. But it’s important to distinguish between, on one hand, the necessity of addressing societal inequities brought about by capitalism without guardrails and pervasive inequality of opportunity, and, on the other, the dangerous notion that because the deck is stacked against the vast majority of economic actors, we should perpetuate something we all know is an unsustainable fairy tale.
The teal and pale purple lines in the figure (below) show that fairy tale collapsing, like the dreamworlds in the film Inception.
“The crash in crypto and speculative tech now rivals the internet bubble crash,” BofA’s Michael Hartnett said, referencing the chart.
He cited a combination of the Nasdaq unwind, low liquidity, pool migration and “whale attacks” for what he called the “crypto implosion.”
But Hartnett also alluded to all of the economic realities detailed above. He mentioned the same USA Today article linked here at the outset, calling it “the way we were.”