Bryan Barton stormed onstage at a Bitcoin meetup in Sunnyvale to tell roughly 200 people about his upcoming Save Bitcoin Rally. What does Bitcoin need to be saved from? The BitLicense, which only allows companies approved by the state of New York to traffick in cryptocurrency, a crushing blow to the libertarian ideals of the earliest adopters. In his speech at the Feb. 13 gathering, Barton targeted former Assemblyman Matthew Dababneh, a Los Angeles Democrat who proposed bringing the license to California. To show how wrong Dababneh was to do that, Barton made a comparison.
“There was a female lobbyist. [Dababneh] pushed her into the bathroom and he pumped and dumped all over her,” Barton said of the allegations against Dababneh. “He ended up resigning in disgrace, but that wasn’t the worst thing he did. The worst thing he did was try to introduce the BitLicense into the state of California.”
Despite Barton’s fervor, he remarked how the rally still lacked speakers and funders, but he promised there’d be llamas and bounce houses at the April 7 demonstration set to take place in front of the state Capitol.
Barton wore a T-shirt emblazoned with the logo of the Silk Road, an online black market where Bitcoin first gained traction as a currency thanks to its untraceable, pseudonymous nature. Since then, Bitcoin and other cryptocurrencies have seen a meteoric rise culminating with a single Bitcoin exchanging for nearly $20,000 in mid-December—an astonishing feat for a currency created practically out of thin air by Satoshi Nakamoto, a creator nobody knows.
Will Bitcoin and other cryptocurrencies reach their full potential? Almost certainly not, but that’s not a question to be answered for many years. The question on folks’ minds at the Sunnyvale meetup: will this make me rich?
After what I saw that night, I wouldn’t bet on it.
The crypto klatch took place at the Plug and Play Tech Center, a startup accelerator where they’ve reserved parking spaces for “venture capital investors” 20 feet away from a massive brass statue of Siddhartha. It doesn’t seem there’s any irony intended.
Inside, the walls bear posters recognizing their most successful companies, including—and I swear I didn’t make these up—Health Gorilla, Fog Logic and Credit Sesame. The hallway features the signatures of big money investors. And within these walls, there’s a sea of cubicles dedicated to the creation of startups that do who-knows-what. But there’s also representation from universities like M.I.T. and major companies like Goodyear and Nintendo. On one wall, there’s a photo of a young Barack Obama speaking here.
Upstairs, there was about 20 boxes of pizza and five icy metal bins of beer and soft drinks, provided for free to the attendees, who were people of all races and ages, though the gender ratio tilted mostly masculine. By the end of the two hours, all the complimentary refreshments had been consumed.
Over a slice of pizza, Fernando Serrano said he bought his first cryptocoin last October—in time for the big rise, but also the subsequent fall. I asked how the experience has been.
“It sucks,” he acknowledged, but he thought it’d be “good” again by the end of the year.
Serrano compared cryptocurrency and the blockchain to the internet, which also had its skeptics in the beginning, but made trillions for its adopters. He also thought cryptocurrency will gain holds in India and China and that one coin, Ripple (a BitLicense holder), is going to be worth a lot. I nodded and drank a free beer, which convinced me he was talking a bit of sense.
The next speakers shattered that notion. After Barton’s tirade came Ami Lebendiker from Mango Startups, which plans to offer Mango Tokens to investors in his index fund comprising up to 24 firms in Latin America.
When asked how he chooses these companies, he said they all go through startup accelerators and that he’ll “try to pick the winners.” And like any super-not-suspicious financial scheme, those who buy Mango Tokens early, get a 33 percent bonus—the only fact from the presentation that the man next to me wrote down.
This essentially un-vettable pitch raised my eyebrows. But the third speaker dropped my jaw. He was an exceedingly earnest middle-aged man who introduced himself only as “Alex.” He spoke with an unidentifiable accent and wore a pressed plaid shirt tucked into pleated khakis hemmed neatly above well-used running shoes.
Alex pitched his Money Abundance Project. To paraphrase, he said that if you’re not wealthy, it’s your own fault. And so, Alex promised to make you richer through a series of 50-minute phone calls where he’ll enlighten you with his personalized money-making method. In exchange, you pay him a minimum of $8 per session. He claimed it brought success to four clients, including himself, and that his method “always works” so long as the person is willing to accept his solutions.
Alex must have figured the meeting would be rife with marks. But as transparently phony as the Money Abundance Project sounds, it’s better than cryptocurrency site Prodeum, which went down earlier this year and replaced its webpage with one word: “penis.”
Mine to Keep
Ed Zitron, the founder of EZPR, owns several cryptocurrency mining rigs, the loud, expensive supercomputers that pull coins from the digital ether by solving math problems. Zitron recently started a satirical e-newsletter, where he lobs hot crypto takes as a fictional pundit who is both deeply in debt and fiercely devoted to digital currency. Despite his foray into mining, Zitron thinks Bitcoin, and, frankly, America’s whole investment system, is a bit of a crapshoot.
“There’s nothing to know with Bitcoin,” he said. “There has never been. And let’s be honest, does any stock really follow much logic? It follows more logic than Bitcoin. But it doesn’t follow much. Being able to read the tea leaves is pretty unlikely.”
Zitron got into mining by leveraging some Bitcoin he bought for cheap years ago. As opposed to just buying the coins on internet exchanges, mining gives him some security because he gets more coins even if their values fluctuate. But he only puts in money he said he can afford to lose. And despite his mockery of the loonier trends of crypto-coin, he feels for the people who just want to make a quick buck in tough times.
“Our target of success is so much lower now,” Zitron said. “I believe most people’s base is that they’re just surviving. So they see this asset that’s apparently going through the roof. And they don’t want to be left behind.”
Zitron thinks of buying cryptocurrencies as little more than glorified gambling. Like at a craps table, you place your bets and roll the dice, hoping that your gut prediction is rewarded. He also makes the comparison to the Gold Rush—wherein a bunch of prospectors went broke looking for the gold that mostly ended up in the hands of larger conglomerates. He said now, the cost of getting and staying in the game has gotten so high, it’s mostly a way for the rich to get richer.
Dr. Enrique Pumar, chair of the Sociology department at Santa Clara University, noted a variety of factors that could push people to engage in riskier investment behavior in the current economic climate where only 39 percent of Americans reported having $1,000 in savings, according to a study by Bankrate.
Pumar gave a few factors that may have contributed to our current status: mounting debt, scaled back retirement plans, slow wage growth, the rising cost of college and housing as well as a lack of knowledge about investing—all while public trust in major institutions flirts with all-time lows.
Although there’s not much quantitative data on the impacts of this, Pumar thought it might lead to more risk-taking, especially since Americans are expecting to work much longer than prior generations, and may feel they have time to save money for retirement.
“People say, ‘Wait a minute, I’m not going to retire until 40 years from now,’” he said. “‘I can be entrepreneurial and if I have a little bit of money, I can play around with it. Because if it works out, I lucked out. If it doesn’t work out, I have plenty of time to make up the difference.’”
All this financial uncertainty has prompted some Americans to toss their money at something that promises to make them rich quick and improve the world. And don’t get it twisted, cryptocurrencies were and are a tremendous opportunity to make money.
After the meetup ended, I wandered the nearly empty facility, staring at hundreds of cubicles underneath dozens of signs bearing the logos of startups. There’s no guarantee they’ll make it. Just like most of us have no guarantee we’ll get a raise, a promotion or even a job that will pay us as long as we need money. With most of America facing a steep uphill climb to financial security, it’s hard to blame folks for investigating a shortcut.
“They just wanted a chance at a better life,” Zitron said. “On one hand, you could say it’s risky. And it absolutely was. It definitely was a stupid decision to invest in funny money. But what more human thing is there, than [thinking], ‘This is going to work,’ and taking a chance? It’s not smart. But it’s human.”