A new world order? Cryptocurrency winners speak out on the future of alternative money

Whether it’s all built on sand or not, the cryptocurrency castle has risen. Nellie Bowles meets the lucky, and often paranoid, few who are reaping the rewards of investing early

Nellie Bowles
Thursday 25 January 2018 00:46
comments
What is Bitcoin and why is its price so high?

Recently the founder of something called Ripple briefly became richer than Mark Zuckerberg. Another day an anonymous donor set up an $86m (£61m) bitcoin-fortune charity called the Pineapple Fund. A Tesla with a BLOCKHN number plate was spotted. There’s a surge in people looking to buy bitcoin on their credit cards. After the Long Island Iced Tea company announced it would pivot to blockchain, its stock rose 500 per cent in a day.

In 2017, the cryptocurrency bitcoin went from $830 to $19,300, and now quivers around $10,000. Ether, its main rival, started the year at less than $10, closing out 2017 at $715. Now it’s about $1,000. The wealth is intoxicating news, feverish because it seems so random. Investors trying to grok the landscape compare it to the dot-com bubble of the late 1990s, when valuations soared and it was hard to separate the Amazons and Googles from the Pets.coms and eToys.

The cryptocurrency community is centred around a tightknit group of friends – developers, libertarians, Redditors and cypherpunks – who have known one another for years through get-togethers, crypto conferences and internet message boards. Over long hours in anonymous group chats, San Francisco bars and Settlers of Catan board game nights, they talk about how cryptocurrency will decentralise power and wealth, changing the world order.

The goal may be decentralisation, but the money is extremely concentrated. The Coinbase exchange has more than 13 million accounts that own cryptocurrencies. Data suggests that about 94 per cent of the bitcoin wealth is held by men, and some estimate that 95 per cent of the wealth is held by 4 per cent of the owners.

There are only a few winners here.

They also remember who laughed at them and when.

James Spediacci and his twin brother, Julian, who bought ether when it was about 30 cents, now run one of the most popular whale clubs: private cryptocurrency trading communities where crypto syndicates are coordinated in group chats. He shows me a screen shot of his Facebook post from 2014 telling everyone to buy ether.

“One like,” he says, pointing to his phone. “It got one like.”

Stickers for various cryptocurrency-related companies plastered on a fridge in Gardner’s home

Whether it’s all built on sand or not, the crypto castle has risen. There’s an actual house called the Crypto Castle, and the king is Jeremy Gardner, 25, a rakish investor with a hedge fund who has become the de facto tour guide for crypto newcomers.

Early one afternoon, he opens a bottle of rosé while he charges half a dozen external batteries so he won’t have to ever plug in his phone in Ibiza the next week.

“I do ICOs. It’s my thing,” he says. He’s wearing a pink button-front shirt and pink trousers. “It’s me, a couple VCs and a lot of charlatans.”

An initial coin offering is a way to raise money: a company creates its own cryptocurrency and investors buy into the new coin, without actually buying a stake in the company. Gardner led an ICO for his startup Augur, creating an “Augur token” that he then sold to raise real-world money. These tokens sold fast, and it is one of the forces that kicked off this boom. For a time, the value of Augur, a market-forecasting startup with few customers, exceeded $1bn.

About eight people live in the Crypto Castle on any given night, and some of Gardner’s tenants bring snacks (Cheez-Its and a jar of Nutella). One of the bedrooms has a stripper pole. Gardner leans back into the sofa and rests his feet on the table. He recently did an ICO for a startup afterparty. “You can ICO anything,” he says.

He runs Distributed, a 180-page magazine about cryptocurrency that comes out about once a year. He is now raising $75m for his hedge fund, Ausum (pronounced “awesome”) Ventures. He says his closest friends are moving to Puerto Rico to get around paying taxes.

“They’re going to build a modern-day Atlantis out there,” he says. “But for me, it’s too early in my career to check out.”

He draws a chart to explain the crypto community: 20 per cent for ideology, 60 per cent for the tech and 100 per cent for the money, he says, drawing a circle around it all.

A roommate on the sofa perks up and asks if he’d ever invest in his lucid dreams startup (the idea is a headpiece that induces them). Gardner did not seem impressed: “Probably not,” he says. A reality show wants to follow him around, but he’s sceptical that it can add to his life.

“I literally have a date with Bella Hadid not having a reality show,” he says.

***

A few weeks after our first meeting, as the bitcoin price explodes in December, Gardner seems shaken. People have begun making pilgrimages to the Crypto Castle, knocking on the door, hoping Gardner can help them invest.

“Nothing feels real. It doesn’t feel real,” he says. “I’m ready for crypto assets to go down 90 per cent. I’ll feel better then, I think. This has been too insane.”

Nearby is a building residents call the Crypto Crackhouse.

Grant Hummer, who runs the San Francisco Ethereum Meetup, lives there. Long hallways called Bitcoin Boulevard and Ethereum Alley lead to communal bathrooms. Hummer and his co-founder committed $40m of their own crypto-made money to their new $100m hedge fund, Chromatic Capital.

“My neurons are fried from all the volatility,” Hummer says. “I don’t even care at this point. I’m numb to it. I’ll lose a million dollars in a day and I’m like, OK.”

His room is simple: a bed, a futon, a TV on a mostly empty media console, three keyboard cleaning sprays and a half-dozen canisters of Lysol wipes. His T-shirt reads, “The Lizard of Wall Street”, with a picture of a lizard in a suit, dollar-sign necklaces around its neck. He carries with him a coin that reads, “memento mori”, to remind himself he can die any day. He sees the boom as part of a global apocalypse.

“The worse regular civilisation does and the less you trust, the better crypto does,” Hummer says. “It’s almost like the ultimate short trade.”

Hummer goes out to meet Joe Buttram, 27, for drinks. As a mixed martial arts fighter, Buttram says he fights for a couple hundred dollars, sometimes a few thousand, but his main hobbies are reading website 4chan and buying vintage pornography, passions that have exposed him to cryptocurrency.

Student vibe: about eight people live in the Crypto Castle on any given night

He says his holdings are into double-digit millions but will not give specifics other than to say he has quit his job and is starting a hedge fund. There’s a common paranoia among the crypto-wealthy that they’ll be targeted and robbed since there’s no bank securing the money, so many are obsessively secretive. Many say even their parents don’t know how much they’ve made. This also allows people to pretend to be wealthier than they are, of course.

“It’s unforgiving,” Buttram says. “You make one mistake and it’s all gone.”

They talk about buying Lamborghinis, the single acceptable way to spend money in the ethereum cryptocurrency community. The currency’s founder frequently appears in fan art as Jesus with a Lamborghini. Buttram says he’s renting an orange Lambo for the weekend. And he’s wearing a solid gold bitcoin “B” necklace encrusted with diamonds that he made. Otherwise, HODL.

This is one of the core beliefs in this community: HODL, “hold” typed very fast, as if in a panic. HODL even if you feel FUD – fear, uncertainty and doubt. If you show wealth, it means you don’t really believe in the cryptocurrency revolution, a full remake of the financial system, governments and our world order that will send the price of ether up astronomically.

“HODL when everyone has FUD,” Hummer says quietly, to explain why he still lives in a dorm room. “This will change civilisation. This can 100 x or more from here.”

He knows this is strange.

“When I meet people in the normal world now, I get bored,” Hummer says. “It’s just a different level of consciousness.”

The tone turns sombre.

“Sometimes I think about what would happen to the future if a bomb went off at one of our meetings,” Buttram says.

Hummer says, “A bomb would set back civilisation for years.”

A few days later, Hummer is working from his co-founder’s apartment.

James Fickel, 26, lives in a high-rise with a Russian blue cat called Mr Bigglesworth. Fickel is known in the community for “going full YOLO” and investing $400,000 when ethereum was at 80 cents. Now, with a fortune that he says is in the hundreds of millions, his parents have retired and sent his younger sister to live with him.

“I’m taking over her education,” Fickel says, sitting on a white leather sofa, Mr Bigglesworth asleep in his impossibly skinny arms.

Today, Fickel is outlining the endgame for cryptocurrency true believers.

In 2017, bitcoin went from $830 to $19,300, and now quivers around $10,000 (Reuters)

“It’s the entire world reorganising itself,” Fickel says. “We could get rid of our armies because for the first time you’ll have people saying, ‘I want to vote for a global order.’ It’s the internet waking up – it’s the internet grabbing its pitchfork. That’s the blockchain.”

Hummer is sceptical.

“All I know is the price of ether is going to go up,” Hummer says.

At a jazz bar a few days later, I run into Fickel’s personal trainer, Alan Chen, who is now running in this crypto circle. Fickel has convinced Chen to put his savings into ethereum.

“I’m retired, man,” Chen says. “I’m moving to LA next week. I got a penthouse on Marina del Rey.”

“Don’t say I’m retired,” he adds. “I’m going into business now. I’m going to use blockchain to help personal trainers.”

Nearby is Chante Eliaszadeh, 22, a law student at the University of California, Berkeley, who started the Berkeley Law Blockchain group.

“Obviously the bubble’s going to burst and everyone’s going to need a lawyer,” she says.

***

At the annual San Francisco Bitcoin Meetup Party, hundreds gather at a co-working space, and there is a line out of the door. The waiting list has to be told not to show up. Many are wearing bitcoin- and ethereum-themed clothes from Hodlmoon, which sells unisex cryptocurrency sweaters.

Those closest to the technology are the most cautious. Pieter Wuille, 33, a bitcoin core developer, keeps his backpack on as he wanders around the party. He’s part of the team working to develop the bitcoin technology.

“The technology still needs time to evolve,” Wuille says. “This infusion of interest is bringing the wrong kind of attention. Some people believe bitcoin can’t fail or this technology solves many more problems than it does. It can. And it does not.”

He says everyone is asking him whether to buy bitcoin. “I tell them I have no idea,” he says. “I don’t know!”

“There’s so many people rushing into the space, if it’s a bit of speculation, I’m OK with that,” says the Coinbase chief executive, Brian Armstrong, whose company has become the de facto portal for casual investors. “But we can’t guarantee the website’s going to be up exactly when you need it. Everyone needs to take a deep breath.”

As the holiday party fills up, a cryptocurrency rapper called CoinDaddy – Arya Bahmanyar, 28 – is getting ready to perform.

Formerly a commercial real estate agent, Bahmanyar works full time at CoinDaddy after becoming a self-described crypto-millionaire (“you think I would dress up like this if I wasn’t?”). “Right now all our entertainers come from outside crypto culture – not inside crypto, and we’ve got to change that,” he says.

He points to his outfit – a long white fake mink coat, gold-heeled shoes – and says, “It’s gold, right? It’s gold. It’s a niche, and I’m going to fill it.”

He says he is going to shoot a music video soon for a song called “Lambo Party” and another called “Cryptomum”, about “all these mums are pumping in their children’s savings accounts”.

Maria Lomeli, 56, came to the party to find the people she had put a lot of trust in. A housekeeper from Pacifica, California, she says she has invested $12,000 in cryptocurrencies over the past few weeks after reading about it in the news.

She’s wearing running shoes and a zip-up jacket that says, “Cinemark, the best seats in town”. She worked there cleaning out cinemas. Now she cleans houses. Banks, she says, were designed to steal.

“Charges for sending money to my daughter, interest on our loans,” she says. “And then the money we pay in taxes goes to wars and whatever else they want.”

She found a bitcoin event in the city and asked people there how to buy bitcoin on her phone. She invested $1,000. It went up. So she put in $10,000 more, she says, along with $1,000 in a currency called litecoin. Both her children have discouraged this.

“And maybe I’m going to lose it,” she says. “Maybe I’m going to keep cleaning houses. But something is telling me I can trust this generation. My instinct is telling me this is the future.”

She has to leave the party early because the parking is expensive, she says. She zips her jacket and leaves on her own.

© New York Times

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments