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When I conducted a little experiment recently for an article to highlight a corner of the cryptocurrency world, I knew I was creating something that would live on after the piece was published. But what happened still took me by surprise.
As a business reporter based in London, I have been riveted in recent months by the booming popularity of so-called hype coins. These are the down-market, volatile cousins of Bitcoin, the graybeard of the cryptocurrency world. There are more than 70,000 of these coins — with names like Klaytn, Chiliz, Helium and others you’ve never heard of — and a few dozen new ones are created each day.
On its face, the hype coin phenomenon is one of the most baffling financial crazes in history. At least if you went bust during the tulip mania in the 17th century, you could end up with some tulips. Hype coins have no intrinsic value. But investors and venture capitalists have swooned for them. More than 80 have a market value in excess of $1 billion.
To enlighten readers, and myself, I made my own hype coin. I spent about $1,000 of The New York Times’s money — yes, I first cleared this outlay with editors, and we discussed the legal issues of this project with Times lawyers — to create and promote it.
I christened it Idiot Coin. The name was just one part of an effort to dissuade anyone from hoping it would “moon,” or soar in value. I wanted this thing to flop, and for very solid legal reasons. Two lawyers who specialize in cryptocurrency law explained to me that hype coins are securities and that anyone who markets one with the intent to get rich could earn some unwanted attention from the Securities and Exchange Commission.
I made 21 million Idiot Coins and put seven million up for sale. Here’s where I really tried to sabotage this enterprise. Developers of new crypto will kick-start trading by putting money into a “liquidity pool.” The details here get complicated, but suffice it to say, most coin makers pour about $10,000 into their pools. I put up $30.
I had essentially created a car that had two sips of gas, max. The point was to demonstrate how easy it is to make and promote an utterly useless commodity. Then, I would watch that commodity wobble into oblivion. That’s not what happened.
After the article was published online, a few dozen people showed up in the Idiot Coin account on Telegram, an encrypted messaging platform. A handful started making very amusing memes. Someone named DragonX posted an image of a wide-eyed toddler, tonguing a window, under the words “Wen [sic] I’m not licking windows I’m buying Idiot Coin!”
Others were eager for the coin to earn a fortune. “Let’s get on that idiot moon!” IceMaster0x wrote. It will never moon, I kept replying to would-be boosters. That didn’t stop a few dozen people from snapping up coins, often by the hundreds of thousands.
On the morning of Aug. 10, the total market value of the coin stood at about $6,000. By that evening, it had gone up 10 fold. The next afternoon, nearly all of the coins were sold and the market value had reached $108,000. It went down, then to a new high. On Monday afternoon, it stood at $68,000.
Selling the coins would probably crater the price. This modest pot could vanish in a few frenzied minutes. But if the increase persists, the money will go to charity.
For now, a curious kind of camaraderie has taken shape in the Telegram account for Idiot Coin, with voices and opinions from all around the world. (Shout out to Rusty from Kazakhstan.) “Only buy if you are an Idiot,” reads a meme that keeps getting posted. Some urge stratagems that might cause the coin to appreciate. Others argue that such a notion is way off brand for a currency named Idiot Coin.
As I type this, I have no idea what will happen next. What’s certain is that some people will invest in just about any venture, even one designed for failure.