Over the weekend, Bitcoin crossed into $11K territory, and with it the hopes and dreams of the many faithful who have been holding onto it through the long crypto winter of the past 15 months. Could this be the beginning of a bull run that will take us to $20,000 and beyond? Or is there market manipulation at play?
I had a chance to talk with crypto visionary, Charlie Shrem, best known for pioneering the buying, selling, and spending of Bitcoin at hundreds of retail locations including CVS, Duane Reade, 7-Eleven, Walmart, and Walgreens. Backed by legendary investors Roger Ver and the Winklevoss twins, his company BitInstant was the largest Bitcoin retailer in the world – until they were shut down for operating without a money transmitter license when the law changed during the 2013 market frenzy. Soon after, Shrem was charged with, and pleaded guilty to, violating anti-money laundering laws for selling more than $1 million in Bitcoin to a BitInstant user who was funding illicit activity on the Silk Road marketplace. At the time, taking a freedom fighter stance, he said he knew what he was doing was wrong, “They got a bitcoiner.”
Now the host of Untold Stories, a podcast on the crypto revolution, Shrem has been outspoken on factors affecting the rise of Bitcoin. He tweets frequently and is often interviewed by top journalists such as by Anderson Cooper on 60 Minutes last month. The following is an edited transcript of our discussion:
MARTINE PARIS: Bitcoin broke through $11,000 this weekend, what do you think is driving this rally?
CHARLIE SHREM: There are a lot of reasons. You can’t look at correlation and causation. Basically, the price was in a bear market for a very long time, and now a lot of people don’t think Bitcoin is going away. At this point enough people have accumulated, enough people have bought, and everyone who was going to sell, sold. It’s just how market cycles work. I think anywhere between $10,000 and $20,000 is still a given, and I think this rally goes way above $20,000 in a very short period of time.
Facebook and their consortium of friends which includes some of the most powerful companies in the world – such as Visa, Mastercard, Uber, Lyft, Spotify, Andreessen Horowitz, and others – announced Tuesday, June 18, that they are planning to launch a new global cryptocurrency designed specifically for payments in early 2020. Do you think the Libra announcement caused this bull run in Bitcoin?
I think Libra is definitely creating a conversation for the normal, non-crypto savvy human beings who see Facebook coming into cryptocurrency and are excited about it. On top of that, the price is going up so it’s causing more people to buy. Also the fact that Libra is not out yet and won’t be viable for years, if ever. People who want to get involved in crypto see that Bitcoin right now is the only option. There’s a lot of FOMO [fear of missing out] going on.
Do you think the bull run is being fueled by the fact that it’s so easy to purchase Bitcoin these days?
It’s true. You can buy crypto at a million places around the world. It’s so easy to buy Bitcoin now. It’s so easy to sell Bitcoin. Everyone I know holding Bitcoin is earning interest of six to seven percent, so you can have the upside of Bitcoin while earning interest. People love that. There’s no reason not to own some Bitcoin, and it doesn’t need to be large amounts – just like one or two Bitcoins, $10,000 to $20,000. It’s a significant amount of money but can easily turn into life-changing money. And if you lose $10,000, to many, it’s not the end of the world.
You can also buy just a small fraction of a Bitcoin. On Square Crypto you can buy it for $5. It’s easier to buy it now, and it’s also easier to spend.
Sure, spending is important, but knowing you have the ability to spend it is even more important. The value of knowing you can cash out anywhere in the world into the dollars or whatever currency you want, at anytime instantly, is why this is so important. Not only are people interested in spending it at retailers, but if you’re traveling around the world and need cash quick, the ability to do that is the more important factor here.
Do you think that with the current political climate a lot of people are thinking that Bitcoin is a smart investment?
Bitcoin was meant to be an escape from rogue regimes and institutions. What happens when 2.7 billion people adopt a currency that’s no longer controlled by a government, but rather by a consortium of companies, like Skynet?
It begs the question, who do we trust more? Do we trust companies that are incentivized by profit? As much as we don’t like privacy issues on Facebook, do we trust Facebook more? Or do we trust our government more? Unfortunately, the government has forged this message over the past ten years that you don’t have a choice, there are no other options. “We are the government, you have to trust us. Have a nice day.” For now, companies like Facebook and these other major corporations are basically saying, “We’ll start with money here, you do have a choice.” Who do you trust more, the government or do you trust the consortium of some of the largest companies in the world who are incentivized by money? And if you don’t like these companies anymore, you stop using them and they stop making money.
What are your thoughts on the challenges to Libra and the path to adoption? G7 has convened a task force to ensure that the Libra Association does not pose a threat by operating a shadow bank that skirts regulation. The U.S. House of Representatives has voiced concerns over the potential unprecedented impact that the scale of Facebook’s platform could have on the global financial system. How easy is it going to be for Facebook and friends to be compliant and not run afoul of anti-money laundering laws?
I think you’re going to see some secret settlement between the G7 and Facebook and friends giving governments a golden key into Libra to do whatever they want to do. It likely will be something similar to a Red Notice by Interpol, making it possible for the G7 to freeze the account of whomever, whatever, without any due process.
Many consider a major impediment to living on chain in the United States the fact that the purchase of everyday goods with crypto is a taxable event. What are your thoughts?
Right now, there’s no clarity on what in crypto is taxable. About a month ago, Congress wrote a letter to the IRS, so they’re working on it. What we do know is crypto is property that gets taxed like capital gains. That’s pretty clear, but in terms of all the smaller, nuanced stuff about crypto and taxes, we just don’t know. Clarity is great in every aspect. Clarity is great with regulation. Clarity is fantastic with taxes. Most crypto people want to pay taxes, it just takes a lot of time and effort to figure it out.
Do you think that Bitcoin has been subject to market manipulation by major players?
If we’re comparing Bitcoin to traditional markets, the longer a market exists and the more mature it is, the harder it is to manipulate that market. The Bitcoin markets are extremely immature and young, so yes, you can manipulate the Bitcoin market with large amounts of money that you don’t want to have anymore, but I don’t see what economic incentive there would be to do so, especially how difficult it is to do nowadays.
Do you think we’ve seen manipulation in the past year, like with the spike at April Fools or over Memorial Day weekend, or the flash crash over Thanksgiving last year?
Yes, I think people have tried but the only person who loses is the person trying to do it. When you see a flash crash, it’s a great buying opportunity. When you see a crazy pump, it’s a great selling opportunity, then buy back lower. For prudent investors who are holding, there are interest rate opportunities. It’s only a bad thing for people that are actually doing the manipulation itself.
We started the year in a bear market for crypto and now we’re on a tear. How do you see the year evolving?
You’re going to see a movie, like Bitcoin Billionaires by Ben Mezrich, and there will be a lot of mainstreaming and legitimization. There’s so little Bitcoin to buy, there’s not enough Bitcoin in the world for every millionaire in the United States to own just one. That’s why I tell people own one, two, three, four Bitcoin. It’s life-changing money.