In February, when Glauber Contessoto decided to invest his life
savings in Dogecoin, his friends had concerns.
“They were all like, you’re crazy,” he said. “It’s a joke coin.
It’s a meme. It’s going to crash.”
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Their skepticism was warranted. After all,
Dogecoin is a
joke — a digital currency started in 2013 by a pair of programmers who decided
to spoof the cryptocurrency craze by creating their own virtual money based on
a meme about Doge, a talking Shiba Inu puppy. And investing money in obscure
cryptocurrencies has, historically, been akin to tossing it onto a bonfire.
But Contessoto, 33, who works at a Los Angeles hip-hop media
company, is no ordinary buy-and-hold investor. He is among the many
thrill-seeking amateurs who have leapt headfirst into the markets in recent
months, using stock-trading apps like Robinhood to chase outsize gains on
risky, speculative bets.
In February, after reading a Reddit thread about Dogecoin’s
potential, Contessoto decided to go all in. He maxed out his credit cards,
borrowed money using Robinhood’s margin trading feature, and spent everything
he had on the digital currency — investing about $250,000 in all. Then, he
watched his phone obsessively as Dogecoin became an internet phenomenon whose
value eclipsed that of blue-chip companies like Twitter and General Motors.
The value of his Dogecoin holdings today? Roughly $2 million.
On the surface, Contessoto — who dropped out of college and has
no formal financial training — seems no different than a lucky gambler who
walks into a casino, bets all his chips on a single roulette spin, and walks
out a millionaire.
But he is also emblematic of a new kind of hyper-online investor
who is winning by applying the skills of the digital attention economy —
sharing memes, cultivating buzz, producing endless streams of content for
social media — to the financial markets.
These investors, mostly young men, don’t behave rationally in
the old-fashioned, Homo economicus sense. They pick investments not based on
their underlying fundamentals or the estimates of Wall Street analysts, but on
looser criteria, such as how funny they are, how futuristic they seem, or how
many celebrities are tweeting about them. Their philosophy is that in today’s
media-saturated world, attention is the most valuable commodity of all, and
that anything that is attracting a great deal of it must be worth something.
“Memes are the language of the millennials,” Contessoto said. “Now
we’re going to have a meme matched with a currency.”
Contessoto, an affable, bearded hip-hop fan who goes by the
nickname Jaysn Prolifiq, is a first-generation immigrant whose parents came to
the United States from Brazil when he was 6. As a child in suburban Maryland,
he saw his family struggling with money, and he vowed to become rich. He discovered
a love of hip-hop music as a teenager, and after school, he moved to Los
Angeles, where he took a job making $36,000 a year as an entry-level video
editor while trying to book gigs for an up-and-coming rapper he knew.
His dream was to save up enough money to buy a house — one where
he and his hip-hop friends could live while making music together.
But that kind of cash was elusive, and he spent several years
crashing on couches while trying to save enough for a down payment.
In 2019, he started buying stocks on Robinhood, the
commission-free trading app. He stuck to big, well-known companies like Tesla
and Uber, and when those trades made money, he bought more. And in January
2021, he watched in fascination as a group of traders on Reddit successfully boosted
the stock price of GameStop, squeezing the hedge funds who had bet against the
video game retailer and making millions for themselves in the process. (He
tried to get in on the GameStop trade, but he was too late, and he ended up
losing most of his stake.)
Shortly after the GameStop saga, Contessoto was browsing Reddit
when he saw a post about Dogecoin. He’d heard of the currency before. (Elon
Musk, who is to Dogecoin fans roughly what Pope Francis is to Catholics, had
called it the “people’s crypto.”) But as he did more research, he became
convinced that Dogecoin’s jokey, approachable image might make it the next
GameStop.
“Dogecoin has the best branding of all cryptocurrency,” he said.
“If you put in front of me all the symbols of Ethereum, Bitcoin, Litecoin —
everything just looks super high-tech and futuristic. And Dogecoin just looks
like: Hey
guys, what’s up?”
He imagines that newbies investing in
cryptocurrency for the
first time might gravitate toward something fun and recognizable, and that Dogecoin
might eventually become a kind of on-ramp to the larger world of virtual money.
“I feel like eventually we’re all going to be buying and selling
things with memes, and Dogecoin is going to lead the way,” he said.
Strange as his investment thesis might seem, it’s hard to argue
with the results. Even after a recent crash following Musk’s appearance on “Saturday
Night Live” (in which he joked about Dogecoin being a “hustle”), Dogecoin
remains a very lucrative trade. A dollar invested in Dogecoin on Jan. 1 would
be worth $203 today — much more than a comparable investment in Bitcoin,
Ethereum or any stock in the S&P 500.
What explains Dogecoin’s durability, then?
There’s no doubt that Dogecoin mania, like
GameStop mania before
it, is at least partially attributable to some combination of pandemic-era
boredom and the eternal appeal of get-rich-quick schemes.
But there may be more structural forces at work. Over the past
few years, soaring housing costs, record student loan debt, and historically
low interest rates have made it harder for some young people to imagine
achieving financial stability by slowly working their way up the career ladder
and saving money paycheck by paycheck, the way their parents did.
Instead of ladders, these people are looking for trampolines —
risky, volatile investments that could either result in a life-changing
windfall or send them right back to where they started.
Contessoto is a prime case study. He makes $60,000 a year at his
job now — a decent living, but nowhere near enough to afford a home in Los
Angeles, where the median home costs nearly $1 million. He drives a beat-up
Toyota, and spent years living frugally. But in his 30s, still with no house to
his name, he decided to go looking for something that could change his fortunes
overnight, and ended up at Dogecoin’s door.
When Contessoto recalls the way he used to pursue wealth —
working hard, cutting back on expenses, saving some money from every paycheck —
he sees evidence of a system that is rigged against regular people.
“I feel like those experts on TV, the older generation of old
money and wealth, they try to scare people into staying safe so nobody gets too
rich,” he told me.
His new motto, he said, is “scared money don’t make money.”
Many things about Contessoto’s investing philosophy would turn a
traditional financial adviser’s stomach. But wildest of all is that despite his
spectacular gains, he has not yet cashed out his Dogecoin millions. He thinks
the currency’s price will continue to rise, and he doesn’t want to miss out on
future profits by selling too soon. (He does plan to sell 10 percent of his
stake next year, once his earnings will be classified as long-term capital
gains and taxed at a lower rate.)
Of course, as with any volatile investment, there is a real chance
that Contessoto’s Dogecoin holdings could lose most or all of their value, and
that his dream of homeownership could again be out of reach. Already, the price
of Dogecoin has fallen nearly 50 percent from its all-time high, shaving
hundreds of thousands of dollars off Contessoto’s portfolio.
But gamblers rarely leave the table the first time they lose,
and Contessoto’s commitment to “HODLing” — an acronym favored by cryptocurrency
traders that stands for “hold on for dear life” is buoying him through the
recent market turbulence. Earlier this week, he posted a screenshot of his
cryptocurrency trading app, showing that he’d bought more. And on Thursday,
when the value of his Dogecoin holdings fell to $1.5 million, roughly half what
it was at the peak, he posted another screenshot of his account on Reddit.
“If I can hodl, you can HODL!” the caption read.
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