David Keyston of Crooked River Ranch discovered digital currency investing just nine months ago, and he said, “I’ve made over 30 times my money.”
A 63-year-old, Keyston said he had to work hard to understand blockchain technology, which supports bitcoin, and how to go about converting his dollars to bitcoin and various other cryptocurrencies. Now he hopes to share his knowledge — and enthusiasm — with other baby boomers, so they won’t miss out on an opportunity to make “huge returns” with a “tiny investment.”
Keyston gave his first seminar, “Cryptos Revealed,” to an audience of seven people Thursday evening at Riverhouse on the Deschutes. One of the attendees, who declined to be named, said he walked away feeling confirmed in the strategy he’s already pursuing. Sunriver resident Richard Kuhlman said that, despite his initial skepticism toward anything intangible, after Keyston’s talk he’s ready to start investing.
“It’s just where to start,” Kuhlman said. “It’s very exciting to me.”
But to investing experts, the fact that cryptocurrency has spread from a niche audience of millennials to widespread popularity including older generations is yet another sign of an unsustainable bubble.
“It’s a classic speculative mania we’ve seen many times throughout history,” said Jesse Felder, a former hedge fund trader who lives in Bend and writes a market-research newsletter with 15,000 subscribers. “This might be one of the biggest if not the biggest we’ve ever seen, just in the total price performance. Sadly, people don’t learn from history.”
Bitcoin is a digital currency created and exchanged independent of banks or governments. And that’s a big part of the appeal to Keyston, who said he’s bought 45 different cryptocurrencies, including the original bitcoin.
“It takes away the authority of these institutions we’ve dealt with for decades, hundreds of years,” he said during the seminar.
People who maintain, or “mine,” the computing network that creates digital signatures for each account and transaction are paid in cryptocurrency, but for the most part, one converts dollars on an exchange, such as Coinbase. As bitcoin’s value topped $17,000 this week, the Coinbase app became the top download in Apple’s App Store.
Bitcoin can be used to buy goods and services, but bitcoin fans and bubble watchers like Felder have completely different views on its viability as a currency. During his talk, Keyston admitted that bitcoin does not work well for everyday retail purchases, but he said different cryptocurrencies work well for different uses. His website domain provider, for example, accepts bitcoin, litecoin and dogecoin, he said. He pointed out that Venezuelans, suffering from hyper-inflation in their national currency, are flocking to bitcoin and that Japan has officially recognized bitcoin.
To Felder, bitcoin is no more of a currency than Beanie Babies were in the late 1990s. “A currency is something that facilitates transactions,” he said. “The bitcoin price volatility actually prevents transactions.”
Keyston is a critic of the 1971 decision to sever the U.S. dollar’s tie to the gold standard, and he argues that bitcoin offers a return to “intrinsic value” because a maximum of 21 million bitcoins can be created. A semi-retired publisher in alternative health and healing, Keyston said he spent 30 years investing his own money in precious metals. With cryptocurrency, he hopes to attract people to a day-long seminar Jan. 20 and generate monthly newsletter subscriptions.
“The arguments about our dollar are valid,” Felder said, but he doesn’t think that should lead one to buy bitcoin. Bitcoin itself has several offshoots, and there’s no limit to the number of digital currencies that can be created, he said.
Bend investment adviser Bill Valentine, president of Valentine Ventures, has a similar take: “From what I understand from people smarter than I, cryptocurrency is where we’re headed. That doesn’t mean buying bitcoin at $15,000 is a good investment.”
Valentine said bitcoin’s run-up reminds him of the 2000 dot-com bubble. Indeed, the internet was a big deal, and it only grew in significance, he said. But from 2000 to 2010, “tech stocks were terrible.”
While the Securities and Exchange Commission is closely watching so-called initial coin offerings, through which digital currency startups raise money, one cannot buy stock in bitcoin. But starting Sunday, the Chicago Board Options Exchange will begin bitcoin futures trading. And CME Group Inc., also in Chicago, will start futures trading on Dec. 18.
That means traders can buy and sell contracts based on what they believe to be the future bitcoin price. The decision to trade bitcoin futures was controversial in the financial world, and Keyston said he’s not sure what impact it will have on bitcoin prices. In his seminar he said it’s a sign that trillions of institutional investor dollars are about to flood into the cryptocurrency market. He also acknowledged that futures trading creates a mechanism to bet against bitcoin, which could drive down the price.
“It just gives me the willies,” Valentine said. Like easy mortgages during the real estate bubble, futures trading will only widen the scope and impact of the bitcoin market, he said.
“It’s giving whiskey and car keys to teenage boys,” he said. “I’ve seen this play out before in other things, and I think it ends badly.”