What to know about the crypto-craze before it implodes.

It’s a lazy Sunday morning away from my family, I’m sitting in a hotel room in Montreal, and I’ve got $160,000 in my pocket. Or, rather, my “pocket.”

I’m staying in the neighborhood known locally as the McGill Ghetto, thanks to its proximity to the city’s famous university. My room is large — with a kitchen and living area — but not fancy.

The money is tied up in cryptocurrency — and I’m not ready to cash out.

With a few mouse clicks, I could liquidate my positions and transfer the proceeds (minus fees) into my bank account overnight. After paying capital gains tax, I’d have six figures in legally earned legal tender.

But here’s the rub: Twenty-four hours earlier, my portfolio was worth less than $80,000. Overnight, one particular cryptocurrency — a low-cap privacy coin called Verge — caught fire with the Asian markets. By the same time tomorrow, that $80,000 might evaporate. Or it may double again.

Welcome to the wild world of cryptocurrency, an impossibly young global financial market that runs 24 hours a day, seven days a week. Especially in recent months, the media has become feverish over bitcoin, ethereum, and Initial Coin Offerings, as breathless reporters publish stories of college seniors turned millionaires thanks to tiny investments made during their freshman years.

The reality is far less romantic. For every 1,000-times windfall, thousands more investments have gone south, wiping out trading accounts and nest eggs. As a bitcoin enthusiast since 2013 and casual crypto trader since 2015, I’ve had my share of euphoric wins and heart-crushing losses.

But I’m also a grown man with a family — I don’t Google sports cars when I’m ahead; my dreams involve 529 plans and down payments.

And yet, I’m just as susceptible to wide-eyed greed. Sitting in my hotel room in Montreal, I could have cashed out at $160,000, pocketing enough to cross “college funds” off my to-do list. I could have cashed out, returned to Brooklyn with the better part of a down payment in hand. Instead, I told myself, that half-penny coin has more room to run.

“Forget down payment,” I thought, watching 0.5 cent turn into 0.6 cent on my phone, translating to another $16,000 gain. “Let’s go brownstone shopping with cash.”

That’s not how this story ends, of course. It’s true that a well-placed $3,000 can become $160,000 seemingly overnight. But, as many are learning the hard way, every crypto investment can just as easily evaporate in the time it takes to hit “refresh.”

Bitcoin was created in 2009 by the pseudonymous Satoshi Nakamoto, by all accounts a pioneering genius in the field of computational cryptography. His invention was meant to be used as an unhackable, untraceable currency operating beyond government oversight. Though bitcoin tickled the dreams of many technolibertarians who’d long wanted the internet to function as a utopian digital space, it’s another of Nakamoto’s innovations that gave rise to the cryptocurrency revolution: encrypted, decentralized networking.

The particular way that Nakamoto achieved that is a little complicated, but put as simply as possible, bitcoin runs on a network with no central server. Rather, it’s a network of computers, called miners, that work both collaboratively and competitively. Before any bitcoin transaction is made, it must be validated and confirmed by a consensus of these computers. This decentralization was bitcoin’s true innovation. It’s given rise not only to 1,300 bitcoin clones and descendants, but an entirely new industrial sector known as blockchain technology.

Within a few years of its launch in 2009, bitcoin became less important as a currency than as a commodity, not unlike gold. You can still buy things with bitcoin (and gold, too, for that matter, sort of), but it’s become an investment vehicle for most buyers. Why invest in a virtual currency with no “real” value? Because $2 spent on bitcoin in December 2011 is today worth more than $18,000 — and many believe that bitcoin’s highest prices are yet to come.

At the same time, the clones, knockoffs, and descendants arrived.

Because bitcoin is open-source, anyone can copy, modify, and redeploy its source code for their own purposes. That’s precisely what happened, starting with the introduction of Namecoin ($NMC), a bitcoin offshoot, in 2011. Since then, more than 1,300 new cryptocurrencies have been launched; most, but not all, are traded freely on various cryptocurrency exchange platforms.

They are known as “altcoins” — or, alternatives to bitcoin. Some, like ethereum ($ETH), are fast becoming household names; others are more obscure, known only in cryptocurrency circles, with names like Siberian chervonets ($SIB), florincoin ($FLO), and augur ($REP). Despite not having any physical value, these altcoins are easily converted into real money; buying them is legal in most countries, including the U.S.

In theory, every coin and token has its own raison d’être. For example, no fewer than five cryptocurrencies ($POT, $THC, $CANN, $CCN, and $CNNC) are competing to fix the legal cannabis industry’s banking problems; pinkcoin ($PINK) wants to become a ubiquitous micro-tipping service for nonprofits; foldingcoin ($FLDC) rewards participants in Stanford University’s Folding@home disease-research project. We also have two Trump coins ($TRUMP, $PRES), one Putin coin ($PUT), and dozens more that are too racist or vulgar to bother mentioning.

At a glance, crypto most closely resembles foreign currency trading, and cryptocurrency pairs are bought and sold using dashboards that would be familiar to any E-Trade user. When you trade BTC-ETC, for example, you’re buying and selling ethereum against bitcoin. Non-BTC pairs exist — ethereum-monero, reddcoin-doge — but most traders prefer to trade against BTC, measuring their returns in bitcoin until it’s time to cash out and convert to dollars, euros, renminbi, won, or yen.

But crypto actually moves more like the stock market — a completely unregulated stock market. Prices bounce wildly with rumors and announcements; insider tips are exchanged in private chat groups; pump-and-dumps are organized by whales at the expense of naïve newcomers. For day traders, keeping up with the news can quickly become a full-time job.

Consider my Verge position, for example. Sometime in 2016, I noticed an unusual amount of Twitter chatter about $XVG, its trading symbol. I spent an hour researching Verge — it was formerly known as DogecoinDark; it had recently rebranded and relaunched under the new ticker symbol; its primary purpose was facilitating anonymous transactions.

I happen to believe that there’s a strong future for privacy-oriented cryptocurrencies, so I became more interested in Verge. One of many “low-cap coins,” it was very cheap at the time: For $530, I bought 5 million. When the price dipped two weeks later, I bought another 5 million for $300. Over the next few months, Verge would catch the attention of more traders, which led to more Twitter buzz; the price climbed slowly. I bought 6 million more.

Sometime later, sitting in that hotel room in Montreal, Verge’s price spiked for no good reason I could find. Cryptocurrencies don’t release earnings; they don’t announce dividends. Maybe a secret pump-and-dump group was targeting Verge; or maybe the developer shared a new software update in a Telegram channel. Point is, somewhere, someone sparked a buying spree that, if this were the stock market, would be catnip for the SEC.

Verge is just 1 of 100 trades I’ve made since opening my day-trading account with three bitcoins, then worth about $1,000 apiece. With my eyes wide open to the risks, I started by researching every altcoin listed on the top-100 list by market cap, looking for meaningful price actions. I got into ethereum at $9 (now trading north of $750, though I sold at $300). I flipped modest positions in ripple ($XRP), blackcoin ($BLK), factom ($FCT), and dozens more, scalping most for 10 to 50 percent returns in less than 24 hours. I’ve had losses, of course, but I protect myself with strict stop-loss orders.

But, again, these markets don’t react to fundamentals; they’re driven by publicity and emotion, and they’re prone to manipulation. Speaking again of Verge, I’ve seen skeptics converge on Twitter, crashing the price by 30 percent. But I’ve also ridden dramatic upticks; when tech raconteur John McAfee tweeted his support for Verge and other so-called “privacy coins,” prices climbed 100 percent overnight.

As with the stock market, the trick is identifying tops and bottoms. Buying low and selling high, in other words. This is not easy money.

I signed onto Silk Road in October 2011, a few months after Adrian Chen introduced the illicit darknet marketplace to the general public via his reporting for Gawker and, later, Wired. At the time, a single bitcoin cost $4.10. I know the exact price because I have the outbound emails where I excitedly told friends about this new anonymous digital currency. But I’d probably remember anyway, because regret over the missed opportunity still burns. How could it not? Like everyone else who failed to become a bitcoin millionaire in 2017 by spending $1,000 in 2011, I did not see the future clearly enough.

When I learned about altcoins and crypto trading a few years later, I was determined to not make the same mistake. Starting in 2014, with every paycheck, I squirreled away a few bucks into Coinbase, the popular, user-friendly digital currency exchange. With bitcoin trading at $350, these wee investments added up.

Once I’d accumulated a few coins, I got to work. There are several dozen cryptocurrency trading platforms; for Americans, the most popular are Poloniex, Kraken, Bitfinex, Bittrex, and Bitstamp. Elsewhere, others serve specific markets; you’ll find most South Koreans on Coinone, for example, while Chinese traders gravitate to Binance.

Not only is crypto trading confusing and intimidating, even measuring one’s profit can be tricky. Even if your BTC-ETC position doesn’t move, for example, bitcoin itself may climb in value — giving you USD gains even if you’ve done nothing. This is fine for traders who move in and out of fiat. Most of the traders I’ve met prefer to stay in bitcoin, taking profits occasionally and prudently.

Confusing things further, it’s a general rule that when bitcoin climbs, altcoins fall. Reason being: Holders of altcoins are famous for cashing out to fiat when bitcoin is rocketing. The converse is also true: When bitcoin crashes, traders and investors seek safety in the altcoin markets.

I’ve been more lucky than skilled. Thanks mostly to good timing, my initial investment increased 50-fold. At least for a few days. After that glorious peak in June, my half-penny coin deflated back to reasonable levels, putting me 30 percent down. This has happened more than once. Every time my portfolio dropped by one-third overnight, I resisted the urge to panic-sell; most of the time, my positions recovered.

Very few people have the stomach for $50,000 swings — my wife included. When it comes to investing, she’d rather I took a few smart positions and let them run. After my third roller-coaster ride, I was inclined to agree. To learn how to do this, I needed advice from more experienced traders.

My first stop was the Ainsworth Hotel in midtown. On a Monday night this summer, I joined a few hundred other crypto enthusiasts at the CryptoCircle meetup. There were no speakers, no agenda. Just a cash bar in the Ainsworth’s large backroom, decorated in hunting-lodge chic — dark wood, low lighting, stuffed-animal trophies.

The room was packed with a rainbow coalition of nerds and bros, programmers and entrepreneurs, speculators and true believers. One-quarter of the crowd were newcomers anxious to learn more about this mysterious, new money machine. Everyone was asking, “What’s your favorite coin?” and “What looks good?”

I was reminded of the afternoons that I used to spend at the Meadowlands Racetrack, shooting the shit with old-timers and straining to overhear good tips from the handicappers. In crypto, as in horse racing, everyone’s got their own system. Some traders love investing in Initial Coin Offerings, or ICOs — the process by which new coins are launched onto the market, intentionally named to mimic Initial Public Offerings. Others watch the trading charts, hoping to apply traditional financial models to crypto price action. Still others trade based solely on Twitter and chat-room rumors.

Standing at the bar, I met Rob Behnke, a 33-year-old entrepreneur, musician, and veteran trader who describes his history with cryptocurrencies as “rocky but passionate.”

Behnke caught the bug at the end of 2013, when bitcoin’s price first crossed the $1,000 barrier. In the following months, he enjoyed “some serious profits” that didn’t last long.

“I went all-in on the low-cap altcoin scene,” he said, referring to cryptocurrencies with the smallest market caps. With a well-timed investment, low-cap coins can return staggeringly high returns when they “moon” to 50, 100, or even 1,000 times their initial prices. Such growth can be driven by announcements, such as a strategic hire or a new business partnership. They’re also susceptible to pump-and-dump schemes, where shadowy groups conspire to drive up prices — only to cash out en masse, leaving the suckers behind. Because crypto is unregulated, these scams are impossible to prevent, not to mention prosecute.

“There was a lot of buzz around cloakcoin ($CLOAK),” Behnke explained, “but it ended up being a pump-and-dump … I lost 95 percent of my initial investment after only a few days.”

Still seeing “great potential in bitcoin and the community,” Behnke licked his wounds and set about rebuilding his portfolio. Today, he makes anywhere between 5 and 50 trades a week, though he no longer day-trades. Instead, he’s focused on ICOs, which are increasingly known as token sales and Token Generation Events, or TGEs.
“I’m starting a family and about to be married,” he said. “My goal is early retirement in five years.”

With that, Behnke left and went to work the room on behalf of his new venture, the Token Agency, a marketing company that specializes in token sales and TGEs. Behnke’s start-up is one of many businesses that have sprung up to support the growing cryptocurrency field. Leveraging his knowledge as a veteran trader, Behnke helps other start-ups market and build community around their token offerings. As the saying goes, a gold rush is a good time to be selling shovels.

Waiting for my next drink, I met another entrepreneurial crypto trader. Reed Korach first dipped his toe into online commerce in 1999 when, at just 16 years old, he began eBay-ing antiques that he bought at yard sales. This led to internet marketing and helping others “sell their own e-books and physical products in various niches on Amazon,” he said.

Around this time, Korach came across his first digital money. Few realize that bitcoin was not the first digital currency. In the late ’90s, several experiments in “web currency” and “virtual money” crashed and burned, largely because of government interference. It’s been noted that, if the heavy hand of regulation hadn’t crushed these early experiments — beenz, flooz, e-gold — Satoshi Nakamoto may not have been inspired to create a decentralized network for bitcoin.

Korach still earns his living through e-commerce. He’s also deep into crypto. “I study trends, and then I buy after doing a ton of research,” he said. For example, the cannabis coins were very popular for a while in 2016, and they still gain in price around April 20, the pot-smoker’s holiday. “There are over 1,000 different projects, and it’s important to read about every single one of them. It’s easy to spot a scam coin if they don’t have a strong community … I spend most of the day and night now following the crypto world.”

He’s also what’s known as a “hodler”: a long-term investor. “I do not day-trade and only do research for projects to buy and hold … I am going to hold on to my crypto for a few years and hope for the best.”

For years, Tone Vays built risk models working as a quantitative analyst for Bear Stearns, J.P. Morgan, MFCI, and Axioma. When he first got involved with bitcoin in 2013, he “really liked it” — but only as a curiosity, not as a serious, tradable asset.

“From a tools perspective,” he said during a phone interview from his home in Staten Island, “altcoin trading and bitcoin trading was so amateurish … The more it evolved, the more ridiculous it seemed to me.”

Much of Vays’s skepticism stems from “exchange risk.” Even with today’s improved security and stability, Vays remains skeptical that altcoins can mature into legitimate financial products. Just because everyone’s making money, he said, that doesn’t mean that the markets are operating correctly. At the heart of current growth, he sees scams and manipulation.

“Most of these people know nothing about real trading,” he said. “They’re using all the tricks that were done in the early and late ’90s … Most of the money is made by people coordinating in chat groups who decide to pump these coins.”

Watching altcoins climb and crash so recklessly, Vays finds himself reversing one of his long-held positions as a financial professional. “I hated regulation back when I was at Bear Stearns and J.P. Morgan because I had restrictions on trading. I thought that was ridiculous. I was working in risk analysis — I didn’t have any proprietary information — but I had all this regulation on me.”

These days, he said, “I have a newfound respect for regulation.”

On his YouTube channel and podcast, CryptoScam, Vays is an outspoken bitcoin purist who’s skeptical of coins and tokens launched to great fanfare. He prefers developers “who don’t actively pump their coins. They’re not out there telling you how great it is, how everyone should be using it. They’re not out there sponsoring conferences. It’s ridiculous … These aren’t the kinds of projects that I want to support,” he says.

“You have to realize that you’re entering an unregulated space where you’re trading useless vaporware,” he said. “Yes, if you time it right, there’s plenty of money to be made. But if you continue to double down and double down and never pull anything out, all that value on paper will disappear. Nobody knows when.”

Victor Ramos is a 28-year-old native of Washington Heights who’s been trading for about four years. He got into bitcoin near its first peak in 2013; he was still living with his parents.

Initially, Ramos wanted to “mine” bitcoin on his own. For those who don’t know, in exchange for maintaining the blockchain, participating computers — known as “miners” — earn rewards for their owners in the form of transaction fees and newly minted coins. In other words, if you help maintain the encryption system that supports bitcoin, you’ll get some as a reward — an incentive structure that has created an enormous, energy-intensive competition among competing server farms, the largest being in China.

That’s what made bitcoin mining a practical impossibility for Ramos. Already, in 2013, bitcoin mining was dominated by large operations; with their massive computing power, they squeezed out home enthusiasts trying to run mining software on their personal computers and laptops.

Ramos turned to virtual mining pools, where a few bucks rent CPU time; members of the pool split their profits after paying a small fee to the operator. He focused on mining newer altcoins, where there wasn’t much competition. Slowly, he saw returns on his investment: $100 here, $300 there. It wasn’t F-U money, but it was enough to augment a college kid’s cash flow.

In 2014, he got involved with a “somewhat shady, secretive group” that was on the ground floor for nautiluscoin ($NAUT), the “bitcoin-like currency” launched by CNBC’s Brian Kelly. With a “$40 or $50” investment in mining rigs, Ramos made $10,000.

“I cashed out,” he told me over coffee at a midtown Au Bon Pain. “I was graduating college, and that made my whole summer.”

Ramos is engaged and working full-time as a buyer for programmatic advertising — another industry that didn’t exist just a few years ago. He’s also found a way to combine his hobby and vocation. Using his skills as an ad buyer, he runs campaigns to promote cryptocurrency services; these ads link to affiliate marketing codes that pay him for referrals. He also continues  to mine and trade.

Because he’s been around for a few years, Ramos can count himself among an early crew of believers who bought and sold crypto based on computing know-how, first-hand research, and gut instinct. And among those who got into it for the “right” reasons — quasi-ideological excitement about the possibility of a currency beyond government oversight, not giddy speculative interest in fast returns.

At 29, Josh Olszewicz is another one of crypto’s so-called OGs — a trader who survived bitcoin’s 2013 crash and the bear market that followed. He’s also a self-taught TA trader who pores over charts and graphs, looking for price movements and volatility that can be leveraged. We spoke over Telegram, a Slack-like messaging platform that’s popular with crypto traders.

Born in Michigan, Olszewicz earned an undergraduate degree in human biology at Michigan State; after holding a number of jobs in the medical sciences, he ended up at Johns Hopkins master’s program. He now lives “on the border of Maryland and Washington, D.C.,” where — having quit his most recent position as an ophthalmic technician — he trades cryptocurrency full-time.

Like many of the OGs, Olszewicz is a true believer in bitcoin. “Originally, it was designed to challenge the current system,” he said. “What it has morphed into is probably something else.”

What is that, exactly? “I would categorize it as financial revolution, but that’s coming from someone outside of legacy finance,” he said. “Just going to the ATM or using a banking wire feels like it can be a better experience — and it is, with bitcoin.”

How does he feel about crypto’s newfound popularity? “Back in 2013 and 2014,” he said, “no one really cared, to be honest. It was just a bunch of degenerate misfits. Now, it’s degenerate misfits and Wall Street.”

When he’s not trading, Olszewicz is building his reputation as a crypto expert. He writes two or three TA articles every week, and he tries to keep his YouTube channel current. He’s also working out the details for a paid educational group. (“I think I can teach someone what I learned over a few years’ time in a few weeks.”) He’s also serving as a paid consultant for ICOs.

“Crypto changes so much from week to week,” Olszewicz said. “One year in crypto is like five years anywhere else.”

Of all the wisdom I’ve gathered in these last few months, it’s something that Tone Vays, the former quantitative analyst, said that’s stuck in my head: “Bitcoin doesn’t promise anything.”

Bitcoin has always been an experiment. Today, it’s an experiment with a market cap larger than PayPal’s, but it’s still a work in progress. “It started as a science project to see where it goes,” Vays told me. “It didn’t start out as a for-profit venture.”

For many, bitcoin’s experimental nature is off-putting. Rather than embrace this confusing but exciting new paradigm — which, yes, may crash and burn — they throw bombs. But they’ve been throwing bombs since bitcoin’s price hit $100, then $500, then $1,000. Will $BTC find its support levels above $20,000, or is another crash coming? Both, maybe.

As for me, I’ve split my positions into short- and long-term. Adhering to strict risk management, I’m actively trading just a few bitcoins at a time. The rest of my portfolio is distributed across hardware and paper wallets. If this article attracts any hackers, they’ll get very little from me.

As for my portfolio’s overall value? In the year-plus that I stubbornly held onto my Verge, its price rose and fell dramatically, up to 220-plus and back down to the 50s. Two weeks ago, its price pumped hard — and I could no longer resist. I sold most of my holdings at 444 Satoshi — a tidy 34-fold increase. With bitcoin trading near $20,000 at the time, I came away with mid-six figures after taxes. Not brownstone money, but it’s still cause for Champagne.

If only I’d held another week. Just before Christmas, Verge caught the attention of Forbes, Bloomberg, and Fool.com; the price skyrocketed above 1,400. Even with bitcoin struggling to hold at $15,000, I would’ve put more than $3 million in the bank.

*A version of this article appears in the December 25, 2017, issue of New York Magazine.