The years of wild parties are over. I was looking for survivors.
To be successful on Wall Street, you must be able to spot the shifting winds of the market, the patterns that tell investors when to get in and when to get out. Sometimes the wind is a warm and pleasant wind. Assets are increasing in value and everyone seems to be making money. Other times they turn into a raging storm, leaving financial ruin and poverty in their wake.
If there was one city that experienced a dramatic climate in the markets in recent years, it was Miami. And if there's one city where you can see how incredibly things have changed, it's Miami. Think of it as a financial shelter from the weather off the Florida coast.
When I visited Miami in January 2021, the gentle breezes of stimulus funds and pandemic austerity transformed the city into a cryptocurrency capital and haven for a new generation of online-only stockbrokers. But when I came back in January of this year, signs of changing market sentiment were everywhere.
Gone are the near-daily happy hours at beach bars where Crocs crooners demanded every penny. Traffic is lighter on Miami Beach's most attractive street, Collins Avenue. The home of the NBA's Miami Heat, hastily renamed "FTX Arena" after the city struck a $135 million deal with the now-defunct cryptocurrency, has already been renamed "Miami-Dade Arena." And the rumor around town is that storage for recently purchased Mercedes G Wagons, the unofficial status symbol of Miami's new money, is coming.
Not that the city's longtime residents are nervous about it. A lot of crazy things have happened in Miami: the land grabs of the 1920s, the cocaine boom of the 1980s, and the real estate crisis of 2008. Every time there's a boom, the city goes broke. And whenever the inevitable heist takes place, the Bretts clean up.
The people who really make it in Miami are very similar to the people who make it in the market; constant, clear-eyed and alert to the gale force winds blowing off the Caribbean at night. And those lagging after the wind shift walk away with far fewer dollars but some valuable lessons.
Miami bubble machine
Miami is no stranger to quick wealth infusions. Yes, the city is an international financial hub, but it's also a free haven for fast-money buffs in a state with no income taxes. classically perfect conditions for the formation of financial bubbles. Miami Beach was born during the land rush of the 1920s, when Carl Fisher built the city with sand from Biscayne Bay and ordinary Americans began blindly buying land in Florida. Author Christopher Knowlton, in his book Bubble in the Sun, argues that while this speculation did not directly cause the Great Depression, "the Sunshine State provided both the dynamite and the detonator."
If the 1920s lottery was imaginary land, the 1920s Miami bubble was fueled by imaginary money: cryptocurrencies. Anyway, the idea was the same. Buy the big investment and become incredibly rich in no time. When I visited Miami in February 2021, the vaccine rollout had just begun. Californians and New Yorkers have fled to Florida in record numbers to escape the pandemic winter, find happiness, or both. Miami, on the other hand, roared along as if the epidemic didn't exist.
The stock market was running on stimulus fuel, and everyone in town knew someone who was raising funds for Robinhood. You couldn't find a seat at Carbone, the elegant red sauce restaurant imported from New York and served to the stars. The city's mayor, Francis Suarez, has lived up to Miami's reputation for great reception , establishing himself as the one-stop pull for the crypto crowd, the startup crowd, and any financial firm that might consider moving into the city to pull. As Bitcoin surpassed $40,000, the city released a "white paper" claiming that cryptocurrencies would "change the world," create their own digital currency, and attract the biggest names in digital finance. Crypto has been injected into every feature of Miami, most notably its largest annual festival, Art Basel. As easily as Pitbull dons aviator glasses, Miami has absorbed the frenetic energy of an entire country disaffected by the pandemic and awash with cash.
"The pitch was like the days of cocaine cowboys in Miami," one real estate agent who specializes in selling luxury homes to wealthy newcomers told me. "Come here and it's free." I didn't think it was the right move, but cash is still king in Miami."
A real estate agent told me that during this boom, they got a lot of young people from the crypto world looking at properties, even though they rarely bought anything. They played like wealthy real estate gurus, the agent said, "trying to be experts on something they don't really understand," and often didn't ask if a potential deal made financial sense. His visits to the estate lacked substance, often compounded by the unlikely combination of naivety and a new fiancée at each meeting.
Given the city's trending history, it's no surprise that crypto startups and other technologies built on short-term fads (think Metaverse) have found a home in Miami. Strange was the kind of people who flocked to Miami for this latest speculative frenzy.
"If you don't like going out , get out. Miami is busy," the realtor told me. “I don't think any of them are exposed to nightlife. The things you do in your 20s, these kids did it for the first time."
At night, undercover children dressed in light men's clothing went into the camp disguised as children. And like children in camp, their movement was limited to those parts of the city built for visitors to play. It's unclear if it was out of convenience or simply because they didn't know where else to go. They had too much money to splash around with and not enough idea what to do with it to be there. They weren't wearing white jeans, a Miami nightlife uniform staple, and they couldn't tell the difference between a beautiful woman flirting and a woman minding her own business. However, I was told that if they refer to it, they tip and spend it well. Miami, always resilient, may have cracked under the pressure and tired of teaching, but it hasn't cracked.
This does not mean that the city's entire growth is based on the blockchain. There were also more established players in high finance who stepped forward. Citadel, Wall Street's largest market maker and clear winner of the pandemic cycle, relocated its headquarters and eventually hundreds of employees from Chicago. But one real estate agent told me that there are clear differences between going south with cryptocurrencies and more traditional finance. Unlike crypto kids, these traditional guys came to view properties with families and a financial plan in mind. It was clear that they, like their employees, were looking for a place to sign a long-term contract, or at least a good school district.
Miami residents in particular laughed as the newcomer outlined his warnings of the agony of hurricane season and the unbearable summer heat. The newbies and especially the crypto guys believed they could take over Miami just as easily as the markets. Like many before them, they made the right investment and became incredibly wealthy in no time. So how hard can it be?
The pace will captivate you
In the spring of 2022, this latest bout of Miami startups has learned the same lesson as speculators have in the city's history: It can be pretty tough, bro, literally .
After two years of soaring, the tide has turned and the markets have gone mad. Bitcoin started falling in March, from $60,000 to $16,200 in November. Miami's currency fell 95% from February to May. Technology stocks big and small also suffered. Miami's new money party is starting to run out of libations.
The moment the music really stopped, however, was when FTX, which was worth $32 billion at its peak, collapsed in November and its founder, child prodigy Sam Bankman-Fried, was charged with fraud. It was a screeching noise to be heard in the cryptocurrency world, and other big names in the burgeoning industry, such as Celsius and Gemini, were soon swept away. In Miami, cryptos started disappearing from the city. The bartender at the members-only beach club in South Beach, where the undercover guys were trying to woo me, told me it was a pretty quick death. They all left "because they're all broke," I'm told. It was that easy.
As one man who went from fundraising for Wall Street to cryptocurrencies in Miami and back frankly told me: They said the expectation was that the SBF would be better at keeping up with the tracking game, but it wasn't like that. Without the man CNBC's Jim Cramer calls "the next JP Morgan" and with Washington weighing on the industry, Miami's cryptocurrency kingpins have become scarce.
And as FTX fell, the frigid winds of regulation began sweeping Miami away from Washington. "Honey, regulation means fewer opportunities," the crypto fundraiser said. In interviews, executives like Coinbase CEO Brian Armstrong will tell you that cryptocurrencies welcome regulation because it can remove uncertainty and give participants clarity about the rules of the road. But it's more of a trick. Armstrong and his people want loose regulation.
Therefore, the current loss of trust in cryptocurrencies could be fatal. Regulators clearly believe that cryptocurrencies are too volatile for big banks, which will limit their growth. It seems that the small banks that have served the industry, like San Diego's Silvergate, or, like New York's Signature Bank, are failing from lack of capital when exchange rates fall. Gary Gensler, Chairman of the Securities and Exchange Commission, seems inclined to officially label cryptocurrencies as a security that could bring down the sector entirely, revealing that beneath the thin facade of technological innovation, there is only gambling. Knowing this, the same people who sipped cocktails in their cargo pants and called Miami home in 2021 are now threatening to move their empty empires overseas in 2023 if they haven't already. Gensler seems indifferent.
“There were many true believers in the Miami crypto scene. They wanted to drink the Kool-Aid," said the fundraiser. "All the big animals like Peter Thiel won. The poor kids just broke down."
In January, I met with a former cryptocurrency executive at the bar at the Eden Roc Hotel in South Beach. Miami has had its usual winter wave of Wall Street talks, and we're reading faces. The crypto CEO wanted to see if the Wall Street base had figured out what they figured months earlier; that the beach party is over. "It's smoke and mirrors. There's no real money here anymore,” said the former cryptocurrency executive, a third-generation Wall Street insider, “everything went to Dubai and Singapore.” On people's faces there was fear where there was greed two years ago.
"You know who's rich in Miami?" A former cryptocurrency CEO, now a naturalized Miami citizen, asked me, "People who make yacht windows."
You're right. The people who survive in the city regardless of the weather are the people who make a living from their glamorous lifestyle. They work in nightlife, hospitality, real estate and anything that can provide infrastructure for vacation entertainment. Like so many speculators before them, the crypto kids have come and gone, leaving little trace in the sand. Some of the wealth that has flowed to Miami in recent years will remain. But just like the stock market crash, most are gone forever. It's a routine the city has grown accustomed to. Nature heals. With another wave of money flowing in and out, Miami remains sun-kissed and unscathed, but always awaits the next change of wind.
Lynette Lopez is a senior reporter at Insider.
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