How I Lost a Million Dollars In Crypto

The theme of all these anecdotes is, there was an ungodly amount of easy money just sloshing around in 2020 and 2021. The kind we surely won’t see again in our lifetimes. The excesses of the post-2008 ZIRP era combined with the shock of a pandemic and the historic money printing it led to created the least efficient era in the history of the United States dollar. Trump sent out stimulus checks, and they went into people’s Robinhood accounts and into Dogecoin. The seven zombie crypto chains from 2017 that no one used became billion-dollar money creation machines thanks to Robinhood’s giga volume from giga normies. Tom Brady put laser eyes on himself. Mark Zuckerberg renamed Facebook to Meta. Celebrities were on Jimmy Fallon pushing ugly pictures of apes they didn’t own selling for tens of millions. Frenzy doesn’t even begin to describe the 2021 crypto bull run.

And I traded all of it. Like so many other websites in that period, Paste Politics shut down in 2020 and I was out of a job. The biggest mindfuck of my entire life was being unemployed and watching writers and journalists far more talented and experienced than me also struggle to find work, all while my net worth was skyrocketing towards its all-time highs.

So fuck it I thought. I know how this works at this point. I can trade this. Crypto is filled with some of the dumbest and most gullible people alive who don’t know where the sell button is, so I figured that by being a somewhat well-adjusted person not afraid of the sell button anymore, I had a competitive advantage over 90 percent of the market. I stopped looking for jobs in 2021 and decided that I was going full-time degenerate for one year only, and boy howdy did I ever. I began the year tragically misreading the market, as my lingering crypto curiosity and idealism from 2014 obscured me from how to actually make money in this stupid world. I began 2021 betting on a basket of shitcoins that all did things I thought may be helpful or interesting.

What an idiot!

Then Dogecoin put that shitbag Elon Musk on Saturday Night Live and I learned how this market actually works. People buy memes in crypto. It’s actually a pretty interesting sociological angle to this madness where Jeo Boden pumps like mad, and trading crypto is a lot like poker in trying to read who is at the table in order to glean how they may act.

So after Elon’s SNL appearance I went on a hunt for the next big thing. Crypto bull runs typically follow the pattern of Bitcoin’s price rising first, and then people take those gains to pump Ethereum’s price, then they move those profits into shitcoins, as each successive pump goes further and further out on the risk curve until it reaches a level of hysteria too unreasonable for crypto and implodes the market.

This is called foreshadowing.

I figured that since Robinhood and Elon Musk memed Dogecoin into an asset larger than some companies in the S&P500, that the same kind of Bitcoin to shitcoin risk cycle would unfold in memecoins under Dogecoin. This is where I found Shiba Inu (SHIB), the second-greatest trade I have ever made.

Elon on SNL pretty much marked the top of the first part of the 2021 crypto bull run, and with hindsight, I think was the only organic part of that bull run before FTX got its claws into it and the Luna Ponzi provided everyone with 20 percent interest on “dollars” that no one seemed too curious to ask about until it was too late. In this pre-Luna world in the naivete of spring 2021, crypto did what crypto does and prices crashed one May morning, and many wondered whether the fun of the last year since the Fed saved the market was over.

At first, I was worried this was it and sold some of my golden goose near the June lows. But after some more thought, I came to believe that the party wasn’t over. Too many people made way too much money from the 2020 crash up to that point for that to be the end of the run, and a 30 to 50 percent pullback for Bitcoin in a bull run is pretty normal. Prices looked more attractive relative to the elevated levels of the past several months, and I figured that summer 2021 was the time to load up, not to exit the casino.

I was right, but I let a cardinal trading sin plague me, where I chased some losses that emerged at the lows. I had done a poor job trading the first part of the year but still made money (to give you an idea how stupid that year was), but nowhere as much as I could have. I discovered Aave, one of the few useful tools in crypto that functions as a bank that hasn’t been hacked yet, and I stored my big pile of Ethereum in there. This allowed me to take out a loan on it to try to catch up to where I thought my profits should be at, and this is where this story takes a darker turn.

A Life Lived on Leverage

I took out a loan of 50 grand to buy more Ethereum to add to my collateral in Aave. When Ethereum’s price rose, the value of my collateral rose, and I took out another 200 grand as I believed my thesis was manifesting in the real world. Ethereum rose again, and I felt like a genius, making gobs of money hand over fist by simply clicking a few buttons. Soon I would find myself with well into six figures of debt, but it wasn’t a problem because my big pile of Ethereum was keeping my loan to value ratio (LTV) low and away from the danger zone.

I also had cash from my mildly profitable trades that I put into SHIB, and I shudder to think what the rest of 2021 would have been like without it. On a trip to Philadelphia, I saw a guy wearing a SHIB t-shirt, which confirmed my thesis, and I became a full evangelist for the coming gigapump. I told everyone within earshot that this was the shitcoin to bet on, and I was staking a significant portion of my reputation on it. I loaded up on it, even taking out some more leverage to invest in what I thought was the most obvious trade in the history of mankind.

In October, the SHIB gigapump finally arrived. It rose over 1200 percent from the summer lows where I was telling everyone to buy it. My bad suggestions from earlier in the year had been redeemed, and holy hell my net worth was comical. I was comfortably in the two-comma club and a fucking dog coin comprised half of my net worth. It is really impossible to fully capture the stupidity of 2021 in words. It was so stupid I knew I had to sell some SHIB at that point, if nothing more than to be able to proudly say one of the dumbest sentences in existence: “I was right about Shiba Inu.”

I soon began looking at a Porche Taycan. This is one of the greatest lessons I have ever internalized, and something you can’t learn in finance school: you are your own top signal and most of the time you’ll first recognize it in hindsight. If you are scrolling through luxury items because you just looked at your portfolio, smash the sell button and make sure you can pay for them.

I didn’t smash the sell button, or get the Taycan, despite the growing leverage I was amassing as I geared up for my market thesis to reach its final stage. I had traded the post-Elon SNL crypto run perfectly up to that point, and my thesis was that this was part of crypto’s typical three-wave pattern. I will go to my grave believing that was true, but what I failed to consider was that the real world has a say too and can interrupt even the best laid plans.

Namely, the great inflation print of November 2021 that changed the world and killed the third crypto bull wave. The economy had run too hot with too much easy money pushing up my stupid dog coin, and now it was showing up in inflation numbers to a degree not seen in decades. My bill from the ZIRP gods from that fateful day at the dealership had finally come due. We had to put the breaks on fast, and interest rates had to rise while the American economy genuinely could not cool down until dog coins crashed.

I knew this spelled doom for the market, especially since SHIB pumping meant we were close to the end of the cycle, but monetary policy moves very slow, and the March 2022 meeting was identified as the date to enact the Fed’s regime change, so I figured the budding third wave that crypto was threatening while sitting at all-time highs would run through the holidays like it did in 2017. Plus, I had taken out a fresh round of leverage as soon as it breached all-time highs, assuming this was the start of the next wave up, and didn’t want to admit defeat this close to victory. Crypto didn’t pull back during this period, not yet, but it just tepidly floated along. Something had changed in the market, and I refused to see it. I was like a junkie saying, “just one more pump and I’m done.” I had made so much money (on paper) up to that point that I knew a third big wave could get my net worth up near “maybe I never have to work again” figures.

But as the market saying goes; stairs up, elevator down. My leverage ploy was a genius move until it wasn’t. I woke up one morning to not a full-blown crash, but it was a big one that clearly blew up a ton of other people’s leverage, the kind of reset my gut told me changed the positioning of the market. A sense of doom began to envelop me as I knew I had to find the nearest exit as soon as possible. Watching a huge ETH position get margin called on a second-tier decentralized finance platform, then seeing ETH’s price fall an extra 5 percent relative to the rest of the market as it’s happening, put the fear of God into me knowing there were tons of positions like mine ready to nuke the market all the way down the elevator shaft should we become forced sellers. If ETH’s price continued to slip to a point where my LTV was too large, my golden goose would get sold to cover my debt.

Waking up every day knowing that you have to check crypto prices to make sure your entire net worth doesn’t get vaporized is not the most enjoyable experience, but it’s the life I lived in December to March as I looked for one more exit pump to unload my levered holdings. My six-figure tax bill loomed large over my every move, knowing that a ticking time bomb in April sat at the heart of all my work over the past year.

Then one night, I froze. Literally. The market pulled back again, and I went to unload more leverage at a loss and my fingers wouldn’t move. I was so stressed out that I had temporarily lost the physical ability to even smash the sell button, the main thing that convinced me I could do this in the first place. After lying down to calm my nerves a bit, I regained control of my fingers and opened my laptop and sold more Ethereum, knowing I had to get out of this imploding market to save both my mental and physical health.

I sold all of my Ethereum in January, February and March 2022, much of it at a loss. Leverage works until it doesn’t and I have lived this maxim. At its peak, my debt on my Ethereum was a little more than $850,000. This is how I lost a million dollars in crypto. Taking out a mountain of debt to sell into a pump that never came, and subsequently having to dump a ton of it at a loss just to make sure I could pay my taxes. My 2021 and 2022 tax bills are pretty hilarious, as one year I reported a gain of over a million dollars and the next I reported a loss of over a million dollars. I am the cautionary crypto tale.

But not totally, because unlike many others who have over-traded their way into a gargantuan tax bill they couldn’t pay, I did escape the casino with some money in my pocket, enough to pay the IRS and for a grad school lesson in how to actually manage money. Sometimes I think about what my life may be like if I had sold my ETH and not just my SHIB near the top when I was looking at Porches, but I’m not sure I would be better off. The panic of the next few months taught me life lessons I will carry with me forever, and it instilled a discipline within me that cashing out with millions certainly would not have, while my SHIB trade still helped me come out ahead in the end. The way I look at my crypto saga is that I paid for a very expensive but very valuable lesson about markets, finance, and myself. The most valuable one I learned is to stay the hell away from leverage in crypto, a lesson JPMorgan seems determined to learn for themselves.