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Bitcoin believers explain why they've bought in

Special to the Union Leader

December 29. 2017 8:04PM
Co-owner Derrick Freeman stands in the doorway of his newly opened Free State Bitcoin Shoppe in Portsmouth last summer. "We moved from San Francisco to Portsmouth because there was even more cryptocurrency activity happening (in New Hampshire) than in Silicon Valley," he says. (COURTESY)

Even before Chris Rietmann opened up Route 101 Gifts in Keene, he traded in Bitcoin. He's one of many early adopters in the Granite State who took a chance that cryptocurrency could someday be worth more than the quarter they were paying for it.

And so, this month, when the value of bitcoin surged above $16,000 for the first time ever, you could be forgiven for expecting Rietmann and others like him might be off on a deserted island somewhere sipping something frothy and counting their block chains. But the reality of it is a bit different.

"Well, I'm at work right now if that answers your question," Rietmann said, chuckling. "I know a few (cryptocurrency) millionaires. I've corresponded with a few billionaires. And that's simply due to their vision of being in this space in 2010, 2011, and investing lots of money into it. They are probably more rare than people think, but they are out there."

This speculation about bitcoin believers becoming a quiet nouveau riche, was sparked when cryptocurrency took one step out of the shadows and into the mainstream: The first bitcoin futures trades kicked off in early December on the Cboe Futures Exchange, followed a week later by CME Group and the expectation that NASDAQ will get in on the action in 2018.

This talk came despite the futures' value plummeting 30 points to $11,159.93 the following week before righting itself to $16,030 a few days later. Since then bitcoin reached nearly $20,000, but it was trading Thursday at just under $14,000, underscoring its volatilty. CNBC quoted an analyst Wednesday who said it could trade in 2018 in a range from $6,500 to $22,000.

In other words, no one knows where it will go.

"Let me put it this way," Rietmann said, "if you bought bitcoin for a quarter and you held onto it and you held onto it and suddenly it's 2013, and you bought it in 2010. Guess what? Bitcoin hit $1,000. You paid a quarter for it and it hit a thousand. But then, the price starts to drop. The price starts to go down, it's $950, it's $900. How many people would have the courage to look at that and go, 'Really, is it ever going to go higher than $1,000?'

"So I think you have a lot of people along the way who made very good profits, but those guys who didn't sell when it hit $1,000, they didn't sell when it hit $2,000, they stuck with it. They are pretty rare."

Few people, including the merchants who accept bitcoin, hold onto it for long.

As Kirk McNeil, owner of Area 23 bar and restaurant in Concord, which accepts cryptocurrency payment, explained, being a new establishment, he has spent his bitcoin almost as soon as it comes in. But even if he held onto it, he said, it wouldn't have grown enough for him to quit his day job.

"It has never yet been a huge thing for us in terms of the amount of money we bring," he said. "Quite frankly we bring in as much from bitcoin as we do from our jukebox. But for that very reason, I just think of it as an added feature for why some people might want to come and do business with us. Because the people who are very interested in bitcoin, like to be able to use it or other cryptocurrencies or other things of that nature."

Bitcoin and other cryptocurrencies are popular with the libertarian Free State movement. (FREE STATE BITCOIN SHOPPE)

A bitcoin hotbed

Derrick Freeman, co-owner of the Free State Bitcoin Shoppe in Portsmouth, said that is the very reason he and partner Steven Zeiler opened up their store in June. Freeman explains that they were living in San Francisco, where he was a software developer, when they noticed New Hampshire was a hotbed of cryptocurrency action.

Not coincidentally, the cryptocurrency and New Hampshire are both popular within the libertarian Free State political movement. 

"We moved from San Francisco to Portsmouth because there was even more cryptocurrency activity happening here than in Silicon Valley," Freeman said. "So we were attracted to New Hampshire because there was already so much bitcoin activity happening: bitcoin businesses, bitcoin users, places where you can actually spend it in real life on real things. So that really excited us."

Over the summer, Freeman and Zeiler noticed a vacant storefront in Portsmouth and decided to open a retail space where they only accept cryptocurrency. According to their website, they aim to "Help people use better money. Inside the Shoppe, you'll find unique crypto-themed gifts, seditious books, libertarian art, pro-science T-shirts, and "Live Free or Die" propaganda - all available for Bitcoin, Ethereum, Dash, and most other cryptocurrencies. We love to talk tech and are here to answer your crypto questions."

To that end, Freeman said, they have literature posted outside their business telling people how to get a digital wallet and offering a list of businesses on the Seacoast accepting the digital currency.

"There are more than two dozen businesses in the Seacoast area where you can spend cryptocurrencies, and I'm finding new ones every day," Freeman said. "Bitcoin has really been as much a local currency in New Hampshire as it has been a global currency. Because there are so many small independent businesses owners that say, 'I will take this as payment,' then they can turn around and spend it at the business next door or across the street. So it's become a local currency even though you can of course use it globally and online."

Freeman, like Rietmann and McNeil, said he's not very concerned about the fluctuations in value bitcoin is experiencing. "Price fluctuations are just a part of life," he said. "We see it with gas prices and food prices so I am not surprised that we see it with cryptocurrencies."

In fact, Rietmann said one of the biggest reasons he started accepting cryptocurrency was because it was a less risky way to get paid.

He explained that back in 2012, he had an online business selling internet routers that had built-in, configured virtual private networks that would allow users to encrypt all of the traffic that came out of their homes or their businesses.

"In some parts of the world, that is illegal," he said. "And for people that are under governments that deny them a basic right of privacy, if they were found through a credit card transaction or something else to have purchased something like that, then there could be issues."

But bitcoin and other cryptocurrencies, allow for transactions to occur without involving banks or anything else, Rietmann said. Further, bitcoin transactions are unique from a business's point of view in that they use a block chain technology that is immutable. "What that simply means is, once a transaction has been conducted, money has been sent from point A to point B, there's no reversing that," he said.

So, from his perspective, it's a bit more secure for businesses and consumers or people sending money one to another because there's no possible way to "monkey" with the books, he said.

The Ledger Blue is a digital wallet that allows users to manage cryptocurrency transactions. (COURTESY)

Buying power

Another benefit to cryptocurrencies, Rietmann said, is that most of them are slightly deflationary, while U.S. and other currencies around the world tend to be inflationary.

Essentially, governments keep printing money, thus expanding the supply which in turn, he said, reduces the purchasing power of each dollar, pound, euro or whatever it is.

"In the case of cryptocurrencies, most of them have a fixed amount that will ever be created," he said. "With bitcoin it's 21 million. So through this slow process, by slowly increasing the number of bitcoin, we'll have 21 million in the year 2140. It's going to take that long to get to that number. So it ends up being deflationary.

"So you look at the price of bitcoin today it's around $15,000 ... you go back to 2010 it was a quarter. The purchasing power of one bitcoin is directly tied to that. So what I could have bought with a quarter in 2010, I can now buy a car with. My purchasing power has increased."

Rietmann said he doesn't think the deflation of bitcoin over time will be as dramatic as it is today; he links those peaks and valleys to the currency being in the "innovators and early adopters phase."

"I really believe that in a couple of years, we are going to see widespread adoption of cryptocurrencies because it is simply better money," Rietmann said. "And that's going to be important to a lot more people."

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