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I Visited Miami After The Stock Market Crash, Crypto Bubble Pop

Miami was the epicenter of the post-pandemic boom of the stock and crypto markets. But now the party is over and the city is facing downfall. Getty Images; Alyssa Powell / Insider

To be successful on Wall Street, you must be able to recognize the changing market winds – the patterns that inform investors when it is time to get in and when they need to get out. Sometimes, the winds are a warm and inviting breeze: property values ​​are up and it seems everyone is making money. Other times, they turn into a violent thunderstorm, leaving financial ruin and destruction in their wake.

If any city was on the lookout for dramatic weather patterns that seized markets over the past few years, it was Miami. and if there is a city The city where you can see how remarkably things have changed is also Miami. Think of it as a financial weather vane located off the Florida coast.

When I visited Miami in January 2021, the gentle winds of stimulus cash and pandemic-era savings had turned the city into a crypto capital and a haven for a new kind of very-online stock jockey. But when I returned in January this year, the signs of market reversal were everywhere.

Gone are the almost daily happy hours at the beachfront bar where the crypto folks in Crocs get excited about the latest coin. Traffic is light on Collins Avenue, Miami Beach’s sexiest thoroughfare. Home of the NBA’s Miami Heat — which was hastily renamed “FTX Arena” after the city signed a $135 million deal with the now-defunct cryptocurrency exchange — already renamed “Miami-Dade Arena” Has gone. And the gossip around town is that the repo man is coming for the recently purchased Mercedes G wagons – the unofficial status symbol of Miami’s newly minted status.

Not that the city’s older residents are bothered by any of this. Miami has been home to many frenzies – land acquisition in the 1920s, the cocaine boom in the ’80s, and the 2008 real estate bust. And every time there’s an inevitable bust-up, the carpetbaggers clean up.

The people who have actually been able to make it in Miami are a lot like those who make it to market: steady, clear-eyed, and attentive to the potential for overnight storm winds from the Caribbean. And those who exit after the winds change are left with very few dollars but some valuable lessons: Past performance is no guarantee of future returns, and sometimes when the sun shines, it burns. .

miami bubble machine

Miami is no stranger to the injection of fast money. Yes, the city is an international financial center, but it’s also a free-wheeling port, where the state has a love for fast money with no income tax — classically great conditions for creating financial bubbles. Miami Beach was born during the land rush of the ’20s, when Carl Fischer built the city from sand dredged from Biscayne Bay and average Americans began buying plots of land in Florida—overlooked. Author Christopher Knowlton argues in his book “Bubble in the Sun” that although the estimate was not directly the cause of the Great Depression, “the Sunshine State provided both dynamite and detonator.”

If the draw was fantasy land in the 1920s, the bubble of Miami in the 2020s is powered by fantasy money – crypto. Either way, the idea was the same: buy into hot investments and get rich in no time. When I visited Miami in February 2021, the rollout of the vaccine was just beginning. Californians and New Yorkers were fleeing to Florida in record numbers to escape the winter of the pandemic, find wealth, or both. Miami, on the other hand, was raging as if there was no pandemic at all.

The stock market was on a stimulus-fueled heater, and the whole town knew someone who was making money trading on Robinhood. You can’t get a seat at Carbone, the extravagant red-sauce joint imported from New York City and known for catering to the stars. living up to miami’s reputation for big bienvenidos, the city’s mayor, Francis Suárez, set himself up as a one-man welcome wagon for the crypto crowd, the startup crowd, and any financial firms that might consider moving to the city. As bitcoin soared above $40,000, the city published a “white paper” declaring crypto to “change the world”, mined its own digital currency, and began attracting the biggest names in digital finance. Gave. Crypto was injected into basically every Miami event, especially its biggest annual festival, Art Basel. With the utter ease of a pitbull wearing a pair of aviator sunglasses, Miami absorbed the frantic energy of an entire nation frustrated by the pandemic and flush with cash.

“The pitch was like in the cocaine-cowboy days of Miami,” a real-estate broker who specializes in selling high-end properties to wealthy newcomers told me. “‘Come here, and it will be free rein.’ It didn’t feel like the right move, but cash is still king in Miami.”

Crypto people worked their way into every corner of Miami’s party scene: including the annual Art Basel festival. Erica Goldring/Getty Images for Marshland

The real-estate broker told me that during this boom, he took a lot of young men to look at property in the crypto world, although they rarely bought anything. They were cosplaying as wealthy real-estate gurus, Brooker said, “trying to become experts in something they didn’t really understand,” and they often weren’t interested in what Whether a potential deal makes financial sense. There was a lack of grounding in his wealth viewing, often aided by an impossible combination of naïveté and a new girlfriend at every meeting.

Given the city’s history of riding trends, it should come as no surprise that crypto and other tech startups based on short-order fads — think: the metaverse — found a home in Miami. what was weird Kind People who flocked to Miami for this latest betting craze.

“If you are not comfortable going outside, Going out, Miami has a lot to handle,” the real-estate broker told me. “I don’t think any of them are exposed to nightlife. The things you do when you’re 20, these guys were doing it for the first time.”

At night, the Krypto children traveled in apparent packs of men dressed like the boys in the camp. And like the boys in the camp, their movements were restricted to certain parts of the town, which had been built to accommodate visitors to the game. It is unclear whether this was for comfort or simply because they did not know where else to go. They had too much money to be a spring breaker and too little idea what to do with it to be local. He didn’t have on white jeans, a staple of the Miami nightlife uniform, and couldn’t tell the difference between a pretty woman flirting with him and doing her job. However, they tip and spend well when instructed, I’m told. Miami – ever resilient – may have been bowed down by the crowds and tired of teaching, but it’s not broken.

This is not to say that all the development of the city was built on the blockchain. There were other high finance players who also moved. Citadel – Wall Street’s biggest market maker and the undisputed winner of the pandemic cycle – moved its headquarters and eventually hundreds of employees there from Chicago. But the real-estate broker told me there were clear differences between crypto cash and the more traditional finance folks going south. Unlike the crypto kids, these traditional types appeared to look for assets with a family and financial plan in mind. It was clear that, like their employees, they were looking for a place to make a long-term deal – or, at the very least, a good school district.

In private, the Miami native laughed when the newcomer ignored his concerns about hurricane season weather and his warnings about the intolerable summer heat. Newcomers – and crypto kids, in particular – believed they could master Miami as easily as they mastered the markets. Like many before him, he made the right investment choices and became rich in no time. So how hard can it be?

rhythm is gonna get you

In the spring of 2022, this latest round of Miami rookies learned the same lesson as bookies throughout the city’s history: It can literally Be very tough, bro.

After two years of riding high, the winds changed and the markets turned with a vengeance. Bitcoin began its decline in March, going from an all-time high of $60,000 to $16,200 by November. Miami Coin fell 95% from February to May. Small and large tech stocks also rallied. The New Miami Money Party started running out of libels.

However, the moment the music really took off was when FTX — which was worth $32 billion at its peak — collapsed in November and its founder, Sam Bankman-Fried, was accused of fraud. It was a sucker heard around the crypto world, and other big names in the growing industry – like Celsius and Gemini – swept in soon after. In Miami, crypto people started disappearing from the city. A bartender at the members-only beach club in South Beach, where the crypto kids tried to hold court, told me it was a disappearing act pretty quickly. They’re all gone “because they’re all broke,” he told me. It was as simple as that.

As one guy who made the jump from raising money for Wall Street to Miami crypto and then back again clearly tells me: “Everyone knew SBF was a fraud, but Bernie Madoff kept the joke alive for almost 20 years. to continue.” The expectation, he said, was that the SBF would be more adept at keeping up with the shell game – it was not. Without the man CNBC’s Jim Cramer called “the next JP Morgan,” and Washington making an impact on the industry, Miami’s crypto king became rare – fast.

And as FTX fell, a cool breeze of regulation began blowing from Washington, DC to Miami. “Sweetheart, regulation means less opportunity,” said the former crypto fundraiser. In interviews, leaders like Coinbase CEO Brian Armstrong will tell you that crypto welcomes regulation because it can remove uncertainty and provide participants with clarity on the rules of the road. But it’s a fallacy: what Armstrong and his ilk want Loose regulation.

It’s smoke and mirrors. There is no real money here anymore.

That’s why the current collapse of crypto confidence could be fatal. Regulators apparently think crypto is too volatile for big banks to handle, which will limit its growth. As things stand, smaller banks serving the industry are failing — like San Diego’s Silvergate — or floundering, like New York’s Signature Bank, as coin prices fall due to a lack of capital. Securities and Exchange Commission Chairman Gary Gensler is leaning toward officially labeling crypto as a security, which could kill the industry entirely, stating that under the thin veneer of technological innovation, just plain, Old gamble. Knowing this, the same people who were sipping cocktails in their cargo shorts and calling Miami home in 2021 are now threatening to move their vacating empire overseas in 2023 — if they haven’t already. Have not gone Gensler seems undeterred.

“There were a lot of true believers in the Miami crypto scene. They wanted to drink the Kool-Aid,” said the fundraiser. “The big boys like Peter Thiel came out on top. The paupers just fell to nothing.”

In January, I sat with a former crypto executive at the bar of the Eden Rock Hotel in South Beach. Miami was experiencing its usual winter rush of Wall Street conferences, and we were reading faces. Crypto execs wanted to see if Wall Street’s rank and file had figured out what they had figured out months earlier – that the beach party was over. “It’s smoke and mirrors. There’s no real money here anymore,” said the former crypto executive, a third-generation Wall Streeter. “It’s all gone to Dubai and Singapore.” Where there was greed two years ago, there was fear on people’s faces.

“You know who’s rich in Miami?” the former crypto exec – now a naturalized Miami citizen – asked me. “The people who make windows for yachts.”

They are right. The people who survive in the city, whatever the weather, are the people who support its glamorous lifestyle. They work in nightlife, hospitality, real estate and anything that can provide the infrastructure for revelers to have a good time. Like so many speculators before them, the crypto kids have come and gone, leaving hardly any footprints in the sand. Some of the wealth that has come to Miami over the years will last. But like the broader market crash, much of it is gone forever. It’s a routine the city has become accustomed to. Nature is healing. As another tide of money comes and goes, Miami remains sun-drenched and troubled but always keeping an eye out for the next change in the wind.

Lynette Lopez is a senior correspondent at Insider.


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