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Two-Bit Coin Hustlers

Bitcoin may be digital and anonymous, but the real zealots trek to a SoMa garage to buy it in person.

The wolves of bitcoin at play

The wolves of bitcoin at play

“Are you selling Bitcoin?”

Kate Danaher has her phone in one hand and a $10 bill in the other. The 52-year-old animal rights activist and bookkeeper has been standing at the edge of the 30-person crowd gathered inside a SoMa startup’s whitewashed garage, looking for a seller willing to part with some of the digital currency. Now she’s finally found one in Jon Holmquist, a longtime Bitcoin enthusiast. The two sit side by side on metal folding chairs and complete the transfer of .0127 Bitcoin with a few clicks of their phones, after which Danaher hands her $10 over. She plans to buy a small amount every month to help fund her retirement.

This is a live Bitcoin trading session, but it’s less a traditional financial exchange than a cocktail party—the nerdiest cocktail party you’ve ever been to, where everyone clutches a phone instead of a drink. In sum, it offers the hobbyist conviviality of a Trekkie meetup mixed with the transactional nature of a baseball card convention. Attendees sidle up to each other and exchange handshakes and, usually, names before launching into shop talk or currency swaps, in which buyers like Danaher hand over bills to sellers like Holmquist, who then transfer a Bitcoin—or more frequently, now that the price has shot up to hundreds of dollars, some fraction thereof—to the buyer’s account using their smartphone.

Because Bitcoin is a wholly digital currency easily tradable online, this kind of gathering is technically unnecessary. But regulars say that buying and selling Bitcoin in person, instead of through an online trading company, is in keeping with the peer-to-peer spirit of the movement. Face-to-face is also, somewhat paradoxically, one of the few ways to trade anonymously, because regulators require online trading services to collect names and other identifying information.

Though there’s a smattering of women here— Danaher is not the only one—tonight’s attendees are mostly guys: guys who love liberty, guys who love money, and, increasingly, guys who got into Bitcoin for the liberty but stayed for the money. Libertarians and voluntaryists are attracted to the fact that Bitcoin is not controlled by a central authority. Programmers are interested in the mechanism—Bitcoin is a feat of cryptography and can be traded by almost anyone in the world with something approaching anonymity. Speculators are impressed by Bitcoin’s 6,000 percent price spike in 2013—at the beginning of the year, you could buy a Bitcoin for $13.24; by New Year’s Eve, one was worth more than $730. (A few weeks after this meetup, Mt. Gox, the most prominent Bitcoin exchange, announced that it was going bankrupt after a nearly $9 million theft—but even that news has failed to dampen the enthusiasm of the Bitcoin community.)

Of course, the separation from government means that Bitcoin is also linked to crime. It was the currency accepted on the Silk Road, an online drug bazaar taken down by the FBI last October. (In fact, one of tonight’s attendees remembers having seen Ross Ulbricht, the illicit marketplace’s alleged kingpin, at the meetup, and it’s not hard to imagine that the crime boss might’ve stopped by to trade in some of his illgotten gains for rent money.) In January, the chief executive officer of the high-profile cryptocurrency startup BitInstant was arrested on money-laundering charges. Bitcoin is handy for crooks because it can move much more anonymously than money through bank or credit card accounts—especially if it’s traded at face-to-face exchanges like this one.

Yet the Department of Justice stated in congressional hearings last November that the currency is not inherently illegal, and the vibe at tonight’s event hardly seems lawless. In fact, when a long-haired, bearded guy named Morgan offers around a joint, most attendees ignore it, turning back to conversations about startups and the next Bitcoin business conference.

That said, as currency traders go, they’re a ragtag crowd. There’s your stubble-chinned day trader in vintage leather, your hoodie-clad programmer, and your suave former congressional candidate (Libertarian Party). The day trader confides that last week he put every cent he had into a Bitcoin alternative, an even newer and lesser-known currency called Dogecoin. He made the buy at 3 a.m., then spent the next few hours running upstairs to wake his girlfriend with price updates.

“I doubled my life savings in a couple hours,” he says.

“I had a heart attack,” says the girlfriend, who works in advertising and is carrying a bright pink Kate Spade bag.

Holmquist holds up his phone to show off an app that demonstrates another kind of Bitcoin value: Lambo Parity, which tracks what percentage of a Lamborghini one Bitcoin can buy. Tonight, a single unit of the Internet currency is worth “only” about four-thousandths of a Lambo. Holmquist developed the app for a laugh, but it says something about the boundless optimism of a community riding high on seemingly ever-rising values.

Cole Albon, a data warehouse engineer, just took delivery of one of the nation’s only Bitcoin vending machines, with which he hopes to turn a profit by selling the currency at a markup. He’s kicking himself because he prepaid for the machine with 43 Bitcoins several months ago—worth $5,000 at the time. Today, those 43 Bitcoins would have been worth more than $30,000.

“I should have held on to my Bitcoins,” Albon says. Wearing a Levi’s jacket and a bowler hat, he leans glumly against a table at the side of the room. But he rallies to invite the entire gathering to check out his new machine at his apartment. “I have Scotch!” he promises. Half a dozen people take him up on it.

Miya, 63, is here with her son, who convinced her to buy some Bitcoins last spring for $100 to $120 each. Now that the price is over $800, she’s looking to sell a few. “I need some money,” she says with a grin. Bundled in layers of fleece, a silk scarf at her throat, the Japanese immigrant looks like the last person who would be trading in a radical new currency. Last spring, her peers were skeptical. “‘Don’t do that,’ they said. ‘Too risky,’” she recalls, waving as if her friends’ comments were pesky flies. Then she excuses herself to go quiz all the young men in the room about how to maximize her profits.

 

Originally published in the April Issue of San Francisco.

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