If 2017 saw the rise and fall of the cryptocurrency, it was also
the year in which a newly minted class of super-rich emerged —
individuals who through impeccable foresight, sheer luck or a
combination of the two happened to buy in at the right time.
While most people were struggling to understand what bitcoin was,
the cryptocurrency’s value exploded during the second half of the
year, followed shortly by surges in the price of Ethereum, Ripple
and a host of others.
Amid talk of mania, the 1,000 per cent year-on-year returns
produced a clutch of crypto-millionaires and billionaires seemingly
overnight. “This has definitely changed my net worth a bit,” says
Roger Ver, an early evangelist who has been promoting the
cryptocurrency since it was valued at less than $1, earning him the
nickname Bitcoin Jesus.
The price of bitcoin fluctuated between $6,000 and $10,000 last
month, according to the CoinDesk Bitcoin Price Index, having
reached a high of $19,343 in late 2017.
But this group of wealthy individuals extends far beyond the
activist cryptographers and anti-central bank types who were
instrumental in bitcoin’s development and promotion a decade ago.
Newcomers of all stripes have since piled in, from clean-cut
mainstream actors such as the Winklevoss twins — who reportedly
boast a crypto-fortune of $1.3bn — to corporate executives and
teenagers trading in their spare time.
While all may not fully grasp the nuances of the underlying
technology, they are drawn to its allure as an alternative to fiat
capital and as a new, more accessible asset class.
In 2012, when Erik Finman was 12 years old, he repurposed a $1,000
gift from his grandmother for his university fund to buy 100
bitcoin at roughly $10 each. Three years later, after a dramatic
upswing in price, he dropped out of secondary school to trade
cryptocurrencies, start a business and ultimately become a
millionaire by the time he turned 18 last year.
“It’s definitely a 21st-century millennial, Generation Z kind of
story,” he explains, adding that today he spends his time
investing, travelling the world and working on a project with Nasa
to launch a mini-satellite that will catalogue modern culture for
future generations — or other worlds — to discover (like the
Voyager Golden Record launched in 1977).
"I still work all day, because I’m excited about the underlying
changes this is going to bring to the way societies work"
Roger Ver
Globetrotting lifestyles aside, these holders of crypto-wealth
aren’t quick to rest on their laurels. Many hold the sincere belief
that the decentralised technologies have the potential to reconcile
many of the inequities and institutional failures that they see as
having plagued history.
“I still work all day, every day, seven days a week because I’m
excited about the underlying changes that this is going to bring to
the way societies work worldwide,” says Ver, who splits his time
between Japan and the Caribbean island of St Kitts.
He has shifted his focus to promoting bitcoin cash, a new
cryptocurrency that spun off bitcoin last August. He argues that it
has the capacity to process transactions much faster than bitcoin
and is therefore a better candidate to realise the vision of the
global decentralised peer-to-peer payment rail laid out in 2008 by
Satoshi Nakamoto, the elusive founder of the cryptocurrency.
----
Dan Conway, a self-described “failing executive” at US telecoms
group AT&T turned crypto-millionaire, was not trying to get
rich as much as he was trying to send a message in 2016 when he
invested his net worth in Ethereum — priced below $10 at the time
and now worth $1,300.
He saw the cryptocurrency as a disrupter of the modern companies in
which he had spent his career miserably climbing the corporate
ladder. “I invested because I wanted the underdogs to win for once
— losers like me who didn’t make the rules and didn’t have the
money,” says Conway, who is in the process of publishing a book
about his experiences.
“We aren’t Wall Street traders staring at our Bloomberg terminals
trying to make a quick buck. We’d been forced to tweet corporate
philanthropy hashtags and we weren’t going to take it any more,” he
continues. “We have scores to settle and getting rich is just the
first milestone.”
Cryptocurrency mining computers on
sale in Hong Kong © Alex Hofford/EPA
But joining the crypto-millionaire class is not always a ticket to
a care-free life. As the December 2017 kidnapping of the head of a
Ukraine-based bitcoin exchange illustrates, there are risks far
beyond a drop in the price of bitcoin. (Pavel Lerner was released
after a $1m bitcoin ransom was paid.)
“Those types of things are not so fun,” says Ver, who says he has
often been threatened. Indeed, many crypto-holders prefer to remain
anonymous. “If I were a crypto-millionaire, the last thing I would
want to do is tell you about it,” says one investor.
An advert for the Bananacoin
cryptocurrency, which is linked to banana prices ©
Bloomberg
More prosaically, stories have emerged from the UK of banks,
fearful of breaching money-laundering regulations, refusing to
accept windfalls from bitcoin investors. Banks need to be able to
establish an audit trail to ensure funds they accept are
legitimate, but the very nature of cryptocurrencies makes this hard
to provide.
Ultimately, though, most investors are worried about the volatility
of crypto-markets, where double-digit price swings are a regular
occurrence.
Underlying structural and regulatory issues are also a concern.
News of clampdowns by authorities — in China and Europe, for
example — have regularly caused prices to plummet. A full crash —
triggered by market sentiment, if not national regulators — could
happen at any moment, Ver warns. “You could have this cascading
effect where everybody’s running for the exit, and it could be the
death spiral for bitcoin.”
Copyright
The Financial Times Limited
2018. All rights reserved.
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