Getty Images; Alyssa Powell/Insider
The years of wild partying have ended. I went in search of survivors.
To be successful on Wall Street, you have to be able to recognize the changing market winds — patterns that inform investors when it's time to get in and when they need to get out. Sometimes, the winds are a warm and inviting breeze: Assets rise in value and everyone seems to be making money. Other times, they turn into a violent gale, leaving financial destruction and destitution in their wake.
If any city was in the eye of the dramatic weather pattern that seized markets over the past few years, it was Miami. And if any city is the city where you can see just how remarkably things have shifted, it's also Miami. Consider it a financial weather vane perched on 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 the capital of crypto and a paradise for a new type of too-online stock jockey. But when I returned in January this year, signs of the market's meteorological reversal were everywhere.
Gone are the nearly daily happy hours at beachfront bars where crypto guys in Crocs enthused about the newest coin. Traffic on Miami Beach's sexiest thoroughfare, Collins Avenue, is lighter. The home of the NBA's Miami Heat — which was hastily christened "FTX Arena" after the city signed a $135 million deal with the now collapsed cryptocurrency exchange — has already been renamed the "Miami-Dade Arena." And the gossip around town is that the repo man is coming for recently purchased Mercedes G Wagons — the unofficial status symbol of Miami's newly monied.
Not that the city's longtime residents are rattled by any of this. Miami has been home to many a frenzy — the land grabs of the 1920s, the cocaine boom of the '80s, and the real-estate bust of 2008. Every time there is a boom, the city is invaded. And every time there is an inevitable bust, the carpetbaggers clear.
The people who are able to really make it in Miami are a lot like the people who make it in the market: steady, clear-eyed, and attentive to the possibility of gale-force winds blowing in from the Caribbean overnight. And those who limp out after the winds shift leave with a lot fewer dollars but a handful of 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 swift injections of wealth. Yes, the city is an international financial hub, but it's also a free-wheeling port with a love for fast money in a state with no income tax — classically great conditions for forming financial bubbles. Miami Beach itself was born during the land rush of the '20s, when Carl Fisher built the town from sand dredged out of Biscayne Bay and average Americans began buying up plots in Florida sight-unseen. The author Christopher Knowlton argues in his book "Bubble in the Sun" that while this speculation didn't directly cause the Great Depression, "the Sunshine State did provide both the dynamite and the detonator."
If the draw in the 1920s was imaginary land, Miami's bubble in the 2020s was driven by imaginary money — crypto. Either way, the idea was the same: Buy into the hot investment and become fabulously wealthy in no time. When I visited Miami in February 2021, the vaccine rollout was just getting started. Californians and New Yorkers were fleeing to Florida in record numbers to escape the pandemic winter, find riches, or both. Miami, on the other hand, was raging as if there were no pandemic at all.
The stock market was on a stimulus-fueled heater, and the whole town knew somebody who was raking in money trading on Robinhood. You couldn'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 Suarez, set himself up as a one-man welcome wagon for the crypto crowd, the startup crowd, and any financial firm that might consider moving into town. As bitcoin surged above $40,000, the city published a "white paper" that declared crypto would "transform the world," minted its own digital currency, and started attracting the biggest names in digital finance. Crypto was injected into basically every Miami function, especially its biggest annual festival, Art Basel. With all the ease of Pitbull putting on a pair of aviator sunglasses, Miami absorbed the frenetic energy of an entire country frustrated by the pandemic and flush with cash.
"The pitch was like Miami's cocaine-cowboy days," a real-estate broker who specializes in selling high-end properties to rich newcomers told me. "'Come here, and it'll be free rein.' It didn't feel like the right move, but cash is still king in Miami."
Erika Goldring/Getty Images for Marshland
The real-estate broker told me that during this boom, they took a lot of young men in the crypto world to see properties, though they rarely bought anything. They were cosplaying as wealthy real-estate gurus, the broker said, "trying to be an expert in something they didn't really understand," and they were often uninterested in whether a prospective deal made financial sense. There was a lack of grounding in their property viewings, often espoused by the improbable combination of naivety and a new girlfriend at every meeting.
Given the city's history of riding trends, it wasn't surprising that crypto and other tech startups based on short-order fads — think: metaverse — found a home in Miami. What was odder was the kind of people who flocked to Miami for this latest speculative craze.
"If you're not comfortable going out, going out, Miami is a lot to handle," the real-estate broker told me. "I don't think any of them are exposed to nightlife. The things that you do in your 20s, these guys were doing for the first time."
At night, the crypto kids traveled in obvious packs of men dressed like boys at camp. And like boys at camp, their movements were confined to parts of town built to accommodate visitors at play. It's unclear whether that was for comfort or simply because they did not know where else to go. They had too much money to be spring breakers and too little idea what to do with it to be locals. They did not own white jeans, a staple of the Miami nightlife uniform, and could not tell the difference between a pretty woman flirting and one doing her job. They did, however, tip and spend well when instructed, I'm told. Miami — ever elastic — may have bent from crowding and been tired from teaching, but it did not break.
This is not to say that all the city's growth was built on the blockchain. There were more staid players of high finance who relocated as well. Citadel — Wall Street's largest market maker and undisputed victor of the pandemic cycle — moved its headquarters and ultimately hundreds of employees there from Chicago. But the real-estate broker told me there were clear differences between those heading south riding crypto cash and the more traditional finance people. Unlike the crypto kids, these traditional types showed up to view property with a family and a financial plan. 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.
Privately, Miami natives laughed when the newcomersignored their warnings about the anxiety of hurricane season and the unbearable summer heat. The newcomers — and the crypto kids, especially — believed they could master Miami as easily as they had mastered the markets. Like so many before them, they had picked the right investment and become fabulously wealthy in no time. So how hard could it be?
The rhythm is going to get you
In spring 2022, this recent round of Miami novices learned the same lesson as speculators throughout the city's history: It can literally be pretty tough, bro.
After they spent two years riding high, the winds changed and the markets turned with a vengeance. Bitcoin started collapsing in March, going from a record high of over $60,000 to $16,200 by November. Miami coin fell 95% from February to May. Tech stocks big and small got pounded too. The new Miami money party started to run out of libations.
The moment the music really stopped, though, was when FTX — which had been valued at $32 billion at its peak — collapsed in November and its wunderkind founder, Sam Bankman-Fried, was charged with fraud. It was a sucking sound heard across the crypto world, and other big names in the burgeoning industry — like Celsius and Gemini — were swept away shortly thereafter. In Miami, the crypto guys started disappearing from town. One bartender at a members-only beach club in South Beach, where the crypto kids tried to hold court, told me that it was a pretty quick vanishing act. They're all gone "because they're all broke," they told me. It was as simple as that.
As one person who managed the jump from raising money for Wall Street to Miami crypto and then back again told me frankly: "Everyone knew SBF was a fraud, but Bernie Madoff kept the joke going for almost 20 years." The expectation, they said, was that SBF would be more adept at keeping the shell game going — he wasn't. Without the man CNBC's Jim Cramer called "the next JP Morgan," and with Washington bearing down on the industry, the crypto kings of Miami got scarce — fast.
And as soon as FTX fell, the cold winds of regulation began sweeping into Miami from Washington, DC. "Sweetie, regulation means less opportunity," the former crypto fundraiser said. In interviews, leaders like Coinbase CEO Brian Armstrong will tell you that crypto welcomes regulation because it can remove uncertainty and give participants clarity on the rules of the road. But this is more of a ruse: What Armstrong and his ilk want are lax regulations.
It's smoke and mirrors. There's no real money here anymore.
That is why crypto's current collapse of faith may be fatal. Regulators clearly think crypto is too volatile for big banks to handle, which will limit its growth. As things are, the small banks that were servicing the industry are failing — like San Diego's Silvergate — or flailing, like New York's Signature Bank, for lack of capital as coin prices plummet. Securities and Exchange Commission Chair Gary Gensler seems to be leaning toward officially labeling crypto a security, which could kill the industry entirely by revealing that under its thin veneer of technological innovation, there is just plain, old gambling. 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 emptying empires overseas in 2023 — if they haven't left already. Gensler seems unmoved.
"There were a lot of true believers in the Miami crypto scene. They wanted to drink the Kool-Aid," the fundraiser said. "The big boys like Peter Thiel all got out on top. The paupers just crumbled to nothing."
In January, I sat with a former crypto executive at the bar in South Beach's Eden Roc hotel. Miami was experiencing its normal winter rush of Wall Street conferences, and we were reading faces. The crypto exec wanted to see whether Wall Street's rank and file had figured out what they had figured out months before — that the beach party was over. "It's smoke and mirrors. There's no real money here anymore," the former crypto exec, a third-generation Wall Streeter, said. "It's all gone to Dubai and Singapore." There was fear on people's faces where two years ago there had been greed.
"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're right. The people who survive in the city, whatever the weather, are those who make a living supporting its glamorous lifestyle. They work in nightlife, hospitality, real estate, and anything that can provide the infrastructure for revelers' good time. Like so many speculators before them, the crypto kids came and went, barely leaving a mark in the sand. Some of the wealth that came into Miami over the past few years will stick. But just like in the wider market crash, much of it is gone forever. This is a routine the city has grown accustomed to. Nature is healing. After another tide of money rushed in and out, Miami remains sun-soaked and unbothered but always keeping one eye out for the next shift in the wind.
Linette Lopez is a senior correspondent at Insider.