The 2017-2018 Crypto Boom and Its Aftermath
Crypto Awakening:
- 2017 Boom: The final months of 2017 saw a surge in cryptocurrency interest. Coinbase, a primary American crypto exchange, experienced a dramatic increase in app downloads, surpassing Robinhood in popularity.
- Author Background: Nathaniel Popper, a notable author and journalist, provides insights into this period through his works, “The Trolls of Wall Street” and “Digital Gold.”
Post-Boom Transition:
- January 2018 Crash: As Bitcoin (BTC) and other digital tokens’ values plunged, investors sought new speculative ventures.
- TD Ameritrade Activity: Trading activity surged by 48% in January 2018, driven by Millennial investors, spurred by concurrent stock market gains.
Robinhood’s Strategic Moves:
- Options Trading Launch: Robinhood capitalized on the crypto downturn by launching commission-free options trading in December 2017.
- User Migration: This new offering attracted a wave of new users, particularly those from the WallStreetBets community on Reddit.
WallStreetBets Dynamics:
- Increased Activity: WallStreetBets saw a massive influx of users eager to trade options, often underestimating the associated risks.
- Cautionary Voices: Community founders and experienced members, like Jaime and Jordan, warned against the dangers of options trading.
Risks and Consequences:
- Nature of Options: Options trading is high-risk, with potential for total loss due to their expiration dates and leverage factors.
- Community Attitudes: Despite warnings, the thrill of high-risk trading and the culture of sharing losses (termed “loss porn”) persisted.
Broader Context:
- Economic Pressures: Many users, burdened by student debt and precarious financial situations, were drawn to speculative trading as a potential quick fix.
- Addictive Behavior: The excitement of trading and the dopamine rush it provides can lead to addictive patterns, especially among young men prone to risk-taking.
Robinhood’s Influence:
- Gamification: Robinhood’s app design, featuring engaging elements like digital confetti, encouraged trading by minimizing risk awareness.
- Behavioral Insights: Strategies similar to those used by casinos were employed to keep users engaged and trading frequently.
Community and Moderation:
- Content Management: Moderators implemented systems to organize content, distinguish serious posts, and manage the increasing volume of activity.
- Support and Guidance: Jordan, a prominent moderator, provided both technical assistance and emotional support, aiming to foster a more responsible trading environment.
Learning and Growth:
- Coping with Losses: Community members used the platform to share experiences, cope with losses, and learn from each other.
- Positive Interventions: Instances of constructive support highlighted the community’s potential for positive impact despite its chaotic nature.
This period in the cryptocurrency and trading world underscores the intersection of speculative enthusiasm, economic desperation, and the psychological impacts of modern trading platforms. The experiences of communities like WallStreetBets offer valuable lessons on the risks and realities of high-stakes trading.
