Yves here. Please welcome Taryn Fivek, who technically is an economist but as you will see does un-economist-like things, such as conducting her own research and even worse, talking to real people. Here, a key finding from her participation in the 2021 Bitcoin conference is that even though the participants presumably have done well with Bitcoin, they see crypto as an ideological, even evangelical movement. Taryn gives a “You are there” sense of the confab. Maybe I’ve spent too much time in the wrong places, but the cheerleading and the checkered speakers are awfully reminiscent of multilevel marketing.
By contrast, Bitcoin/crypto bullishness has cooled generally. For instance, from the lead story at SafeHaven, Why Bitcoin Could Struggle To Recover After Epic Crash:
Bitcoin has crashed spectacularly since May, losing nearly 50% in the space of two months in one of its biggest corrections by the cryptocurrency in recent years.
The market crashed in mid-May after Beijing started cracking down on the space, curbing bitcoin mining due to concerns of excess speculation and warning financial institutions against offering crypto services.
Things quickly went to the dogs after the Department of Justice seized $2.3 million in bitcoin in early June as part of its investigation into a ransomware attack that shut down the Colonial Pipeline’s gas pipeline, the nation’s largest. The DoJ seizure helped fuel concerns that U.S. officials could ramp up their crypto oversight and threw a monkey wrench into one of bitcoin’s supposed forté–non-traceability….
Bitcoin has managed to hold above the psychologically important level of $30,000 through all the turmoil, but has failed to convince anyone that it has any legs left after the mauling.
By Taryn Fivek, an adjunct lecturer of economics at John Jay College and a PhD student studying economic geography with the Earth and Environmental Sciences program at the CUNY Graduate Center. You can follow her on twitter @tarynfivek
“It’s a classic Miami scam!” A man passes the line grinning, arms outstretched, mocking us. “You pay a ton of money to stand in line for four hours and when you get in, there’s no seats.” Bitcoin 2021 begin poorly, with a line of thousands waiting up to three hours to gain entry to the conference. Attendees who shelled out up to $1,000 for a ticket, some wearing polyester suits and fistfuls of hair gel, stand melting under the fierce heat of direct sunlight. The humidity takes no prisoners, and after about an hour the complaining becomes more and more raucous.
The man in front of me is suggesting a class action lawsuit, similar to Woodstock ’99, to nobody in particular. Messages of fury and dismay populate the official conference Telegram thread. To pass the time, I ask the man in front of me what got him interested in Bitcoin, and his answer is evasive and vague. He asks the same question of me, and I tell him that I’m an economics lecturer at CUNY. “Austrian?” he asks. Absolutely not, no. I tell him that I’m considering teaching a course on cryptocurrency, and he interrupts to tell me that it should only be about Bitcoin. He then suggests that I should convince the department to let me install a Bitcoin mining rig.
In the homestretch of the line, a middle-aged female organizer begs everyone to please simmer down, insisting that it’s the City of Miami’s fault for demanding to search every attendee’s bag and wave a metal detector over each outstretched limb. This is the typical response for a libertarian conference, the unofficial political ideology of Bitcoin. When things go wrong, blame the nanny state.
The man who warned us of the “classic Miami scam” is correct. Once inside, there are no seats. Perhaps it is an issue with scaling-up. Ten people are working as staff at the conference, plus a smattering of volunteers and interns. The 2019 Bitcoin conference boasted more than 1,900 attendees. There was no in-person conference in 2020 due to the pandemic, but in 2021 there are more than 14,000 people attending what will later be labelled a Covid “super-spreader” event.
This pique of interest mirrors the sudden scaling-up of Bitcoin itself, which hit a low of $3,867 in March 2020 but reached a height of $28,990 by the end of the year, climbing exponentially higher to a dizzying $64,805 just this past April. That means that if you’d bought $1,000 worth of Bitcoin last March, you’d be sitting on a cute little nest egg of $11,228 at its all-time high, a total return of more than 1000%. And, if you’d put that amount in a decade ago – when the author first heard of Bitcoin – your nest egg would have swelled 387,035% percent to $3,871,355.
Bitcoin is the first-ever cryptocurrency, a distributed ledger technology that operates via a peer-to-peer network, the same kind of network that brought us Napster and BitTorrent. Its creator, the pseudonymous Satoshi Nakamoto, famously engravedhis motivations for creating such a thing on the first block of transactions recorded in this ledger: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” The cause of the financial crisis, he and others in his milieu reasoned, was a financial system spinning out of control thanks to the government’s ability to print endless amounts of money to shore up the international banking system.
Bitcoin not only solved the double-spending problem that complicated previous attempts at digital cash, but would also solve the problems of capitalism more generally by limiting its supply to 21 million coins. All transactions would be engraved in the decentralized ledger (also known as a blockchain) to preserve transparency, albeit pseudonymously. This ledger is protected by advanced cryptography and defended by a network of miners, vast warehouses of computer processors that compete to solve a math problem of varying difficulty every 10 minutes and win a prize of Bitcoin if they do so faster than any other miner. Every four years, the amount of bitcoin awarded to miners is reduced by 50%, assuring scheduled scarcity of a digital asset that will ultimately no longer be available to mine in the year 2140. If this seems confusing and abstract, don’t worry. Few who use and covet the US Dollar understand how it works, but know that it’s worth something. Indeed, a 387,035% return on a ten-year investment is nothing to sneeze at.
With this meteoric rise in Bitcoin’s price came institutional interest, with Wall Street investment banks changing their tuneson crypto and opening desks to consider trading in it. PayPal, Venmo, and Cashapp all offer Bitcoin to users. The IRS asked you about cryptocurrency on your taxes last year. With each bull run, Bitcoin attracts more attention and more buy-in, edging closer to widespread acceptance and adoption, what the fans call “hyperbitcoinization.”
Yet, after the all-time high April, the price of Bitcoin declined nearly 50% in May, dropping back to $36,320. It’s a notoriously volatile asset, with veterans throwing around the acronym HODL (hold on for dear life) to encourage the Bitcoin community to refrain from selling during such painful dips. Such volatility often scares off new investors. The veterans scold that you shouldn’t sell your Bitcoin to the big banks, and, given how much the average person understands blockchain surveillance, whale manipulation is entirely possible. Whales are one of roughly 2,000 entities that happen to own more than 1,000 bitcoins. Elon Musk’s Tesla, for instance, would be considered a whale, as would Satoshi Nakamoto, who owns more than one million bitcoins. Given Musk’s callous impact on the price of assets such as Dogecoin, which has likely raised eyebrows at the SEC, such whale manipulation isn’t completely outside the realm of possibility. The centralization of a decentralized asset entails risk. Indeed, Mircea Popescu, a “whale” who allegedly drowned off the coast of Costa Ricalate in June, was said to own nearly one million bitcoins himself. Were his lost to the sands of time, or were they perhaps retrieved by one of the sex slaves he owned and blogged about? The disappearance or sale of one million bitcoins would obviously affect the market somehow.
While the unofficial motto of the Bitcoin community is “Don’t Trust – Verify”, there sure is a lot of faith on display at Bitcoin 2021. Faith that despite its volatility, Bitcoin will be worth more in four years than it is today. Faith that the whales won’t crash the ship. And, above all else, faith in the underlying economic principles of Bitcoin, which necessarily includes faith in its higher purpose as a political project.
Several times over the course of the conference, speakers make claims such as Bitcoin is the second greatest human innovation next to our ability to harness the power of fire, that Nikola Tesla’s understanding of electricity was ultimately to bring about Bitcoin, that one should sacrifice their family rather than pay a ransom for their safety in Bitcoin. Fix the money, fix the world. Twenty-one million bitcoins to rule them all.
For every woman at this conference, there are five men. Women who are interested in money are suspect in general, but even more so here. Later, I will hear a group of men discussing how to discern between women who are genuinely interested in them and the ones who are hired by the venue to sell more overpriced bottles of liquor. A man pats me on the shoulder encouragingly when I clap for a comment about the CPI Inflation Calculator to tell me how clever I am. He later strikes up a conversation with another woman behind me about how detrimental feminism is to human civilization. Later that day I overhear conversation about a woman’s place in the Bitcoin community. “I don’t really trust women who are into crypto,” says another attendee to his friend. “She’s either lying or looking to take your money.”
For every person of color, there are at least twenty white people. The vast majority are under the age of 34. So few people are wearing masks, maybe less than a dozen I counted all weekend, that to wear one makes you stand out. At registration, each attendee is given a fanny pack with a small vial of sunscreen, branded sunglasses, and a mask that organizers insist is for your privacy, not to protect you and other attendees from Covid-19. It becomes immediately apparent that the 1% of people actually wearing masks stand out and are treated with disdain. A representative for Huobi, a large volume Bitcoin exchange founded in China, now based in the Seychelles due to the Chinese ban on crypto exchanges, is the only speaker to wear a mask. A good portion of his audience walks out in protest, grumbling, while he seeks to publicize the company’s philanthropic endeavors for various UN agencies.
Indeed, the conference is full of strange bedfellows. Speakers slinging alt-right discourse and bemoaning cancel culture are speaking at the same event as Jack Dorsey, the man responsible for banning Donald Trump from Twitter. A talk on using Bitcoin for regime change in Cuba, Venezuela, and Belarus is followed by a discussion on how to circumvent US regulations on Bitcoin. A Mises Institute contributor whose earlier talk decried the entrance of infosec, consultants and bankers into the crypto scene later appears both infuriated and defeated as he interviews Wyoming Senator Cynthia Lummis and Ohio Congressman Warren Davidson about the U.S. government’s role in facilitating widespread Bitcoin adoption. I later review court records in New York City from when the moderator was accused of locking out tenants in SoHo as part of a gentrification scheme. He is on stage wearing a three-piece suit and massive beard in this Miami heat, sweating bullets, red in the face. I wonder how many people in attendance rushed the Capitol on January 6th.
His panel is followed by a pre-recorded audio address from Ross Ulbricht, the 37-year-old founder of Silk Road who is serving two life sentences (plus 40 years) at a Federal prison in Tuscon for money laundering and conspiracy to traffic narcotics. I wonder why the Mises fellow didn’t bring up his case to the congresspeople just before. The lights are dimmed as Ulbricht details his experience in solitary confinement, his voice represented by a moving red audio waveform on black background, interrupted here and there by a harsh automated alert indicating the call originates from federal prison. His story is compelling for sure, the boy genius given life with no parole for being pegged as the first to anonymously sell drugs online. The anguish of his mother falling ill to stress cardiomyopathy, also known as broken heart syndrome, while on a speaking tour to raise money for his legal defense. The line between such people and “legitimate” tech billionaires can be blurry at times. “I want you to understand what it means to lose your freedom” he says, again and again, to a somber audience of thousands seated in darkness.
Ulbricht apologizes for making Bitcoin famous, but some in the audience shake their heads no. Despite being used as currency for dark-web networks like Silk Road, and despite being used in elephant-in-the-room ransomware schemes such as the Colonial Pipeline hijacking, which goes unmentioned, Bitcoin’s proponents generally wave away implications that the technology is used as a medium for criminal activity. Bitcoiners reason that the internet itself owed its early success to the pornography industry. Bitcoiners reason that cash is still the preferred unit of exchange among criminals. Nonetheless, a number of privacy-advocates walk around the conference in t-shirts proclaiming that KYC (“know your customer” regulations that force buyers to submit ID information before purchasing) is the illicit activity.
The political contradictions of the conference are both electric and subliminal. A miner from Kentucky praises the state’s tax incentives,with up to 50% of local hires being subsidized by the government. Steve Lee of Square, a payments company co-founded by Twitter’s Jack Dorsey, claims that Bitcoin mining will incentivize renewable energy adoption through partnership with state and local governments. An art installation called “Trash Cash” is set up between stages – a branded dumpster full of Venezualan Bolivares. The contradictions aren’t directly addressed, though they are expressed often enough. They seem to exist in cacophony with one another. Perhaps yet another issue related to scaling up.
The keynote for the second day is from Tony Hawk, a presentation called “When a Counterculture Goes Mainstream”. He bemoans the skater community considering him a sell-out for embracing his name as a personal brand. He bemoans being labeled “King Sell-Out” by the skater community. “I didn’t change my values system to do any of those endorsements. I used to eat at McDonalds. I still do. Bacon egg and cheese biscuit – whut! This was awesome. These companies that I enjoy are actually paying me to endorse them!” He says that thanks to his pioneering work in selling out skater culture, professional skateboarders no longer face criticism for similar work. He says that his recent work with Subway was “fun.” Conference tickets that included a Tony Hawk meet-and-greet cost $5,400.
The closing plenary headlines Strike founder Jack Mallers promoting the adoption of Bitcoin in so-called developing and emerging markets. Next to 50-foot photos of him with his arms around a Salvadorian child, he claims to be on-boarding 20,000 Salvadorians per day to his Bitcoin remittance and payment system. He sniffles and begins to cry as he announces that, thanks to a bill “they asked me to write – to help write”, there are plans in El Salvador to adopt Bitcoin as legal tender. He cues up a pre-recorded address from the President of El Salvador, 39-year-old Nayib Bukele, who speaks in English and says that he plans to introduce the bill to the Salvadorian congress next week. “In the short term, this will generate jobs and help provide financial inclusion to thousands outside the formal economy,” he says. His following sentence and the rest of his address, what it means for the medium and long term, is completely drowned out by the raucous celebration erupting in the main speaking hall. Mallers is crying openly now, tearing off his shirt to reveal the Salvadoran football jersey underneath he says he received as a gift from President Bukele. Others in the audience are bursting into messy sobs, what might otherwise be considered a strange sight in such a testosterone-soaked space.
“Don’t let people tell you otherwise. That you’re mean on the internet. That you made a meme that offended somebody…They can come after me. They can come after any individual. I will die on this hill but they can’t stop this idea and all the individuals, everyone in this room, is gonna fight for what’s right. And this is why we’re all here, and it’s so important. And I hope you can get out the shower and look yourself in the mirror and say “YOU’RE IMPROVING HUMANITY!” And don’t you dare let anyone tell you otherwise!”
The accompanying slide says that El Salvador has become the first country to accept Bitcoin as an official currency, and the energy in the room is absolutely electric. I find out later that there are only two Bitcoin ATMs, and that Bukele plans to strong arm the national bank into handling Bitcoin. The fact that this “one small step for Bitcoin, one giant leap for mankind”, this new beachhead of freedom, is to be ushered in by a 39-year-old former FMLN-turned-MAGA populist strong arming the rest of the population into acceptance by circumventing the democratic processis just one more contradiction encountered in a space already full of them. Bukele’s connection to the US-backed Venezuelan opposition– whose Bolivares are outside in a dumpster as an art exhibit — is not mentioned. The fact that this announcement precedes the bill’s passage by the Salvadoran government doesn’t seem to matter. The conclusion seems foregone.