Cory Klippsten started issuing warnings about the cryptocurrency market in March. The digital coin luna, tweeted Klippsten, was a scam, run by an entrepreneur with “major Elizabeth Holmes vibes.” The fledgling cryptobank Celsius Network was a “massive explosion risk,” he said.
When those crypto projects collapsed a few weeks later, causing a crash that wiped out about $1 trillion in value, Klippsten became a regular fixture on news shows, where he cast the industry as a morass of hucksters and hypocrites. “Crypto is a scam,” he declared last month.
But Klippsten differs from most crypto-haters on one crucial point: He runs a bitcoin company.
In the crypto world, Klippsten is known as a bitcoin maximalist, or “maxi” – a hardcore evangelist who believes bitcoin will transform the financial system even as fraud pervades the rest of the crypto ecosystem. The Maxis are only a subset of the crypto industry, but their ranks include influential figures such as Jack Dorsey, a founder of Twitter and an early bitcoin proponent.
The maxis continued to buy bitcoin even after the price fell to an 18-month low of about $20,000 in June. (Bitcoin is simply “for sale,” they say.) And as the market has melted, they’ve launched a PR offensive, aiming to convince investors and lawmakers that bitcoin is different from the thousands of other digital currencies that spread in recent years before tanking this spring.
“The only future for non-bitcoin crypto is to seek to be coordinated by banks and governments and become part of the existing system,” Klippsten, 44, said from his home in Los Angeles, where a decorative bitcoin sculpture sat on a bookcase behind him. “Bitcoin is actually outside the system.”
The debate fueled by maxis has become a battle for crypto’s future. The crash shows how closely the industry resembles the worst of the traditional financial system – an interconnected web of risky ventures and casino-like trading practices. The Maxis say they are trying to steer crypto back to some of its original ideals at a pivotal time, as new regulatory scrutiny and growing consumer distrust pose an existential threat to the industry.
They also see an opportunity to profit from the downturn. When Celsius imploded in June, Klippsten trumpeted a campaign that offered his former clients a membership to his financial services firm, Swan Bitcoin, which provides financial planning for bitcoin investors.
Bitcoin advocates have been courting new users ever since the digital currency was invented, in 2008, by a mysterious figure known only by the pseudonym Satoshi Nakamoto. At the time, bitcoin supporters were disillusioned with the mainstream financial system and wanted to create a form of virtual money that could be exchanged without a bank or other intermediary. With a supply limit built into the underlying code, bitcoin was supposed to offer a hedge against inflation, since no centralized authority would be able to print more of it.
Many subsequent cryptocurrencies have lacked these features. Often, new coins are issued by a group of founders who exercise significant control over distribution—a dynamic that can replicate the centralized structure of traditional finance.
“Bitcoin is decentralized, digitally scarce money. Everything else is centralized,” said Jimmy Song, a crypto podcaster and outspoken bitcoin maxi. “There’s a world of difference between censorship-resistant, self-denying money and a gambling car.”
Maxis’ utopian vision of a stable, decentralized but universally accepted alternative currency is far from reality. Bitcoin’s price fluctuates wildly, and investors often treat it as a kind of risky stock, no different from the shares of companies traded on the technology-heavy Nasdaq index.
Hardly anyone uses bitcoin to perform regular transactions. Last year, El Salvador introduced bitcoin as its national currency, but that project has been a resounding failure. Verifying bitcoin transactions — a process known as “mining” because it rewards participants with digital coins — is energy-intensive: Researchers estimate that bitcoin mining can produce as much as 65 megatons of carbon dioxide per year, compared to the annual emissions of Greece.
“You can’t use it to buy anything — it’s far too volatile and complex and full of fees,” John Reed Stark, a former official at the Securities and Exchange Commission, said of bitcoin. “There is no intrinsic value.”
Nevertheless, the maxis have seized the downturn to show that bitcoin is the only cryptocurrency worth taking seriously. “Bitcoin is down, but the case has never been more compelling,” read a recent headline in Bitcoin Magazine.
“If you call out someone’s risks that they’re taking, and they’re otherwise healthy, you can be accused of running the bank or being a troll,” said Michael Saylor, CEO of MicroStrategy, a software company that has built a large bitcoin reserve. “It is a bit difficult to explain this theoretically before the crash happens. But now it has happened.”
Saylor and other maxis have sometimes complained that bitcoin is poorly represented in Washington, where lawmakers have expressed growing concern about the cryptocurrency’s environmental impact.
Some of the crypto work in Washington is funded by companies that offer virtual currencies built on an alternative verification system, which requires less energy to maintain. In April, Chris Larsen, a billionaire co-founder of the cryptocurrency company Ripple, announced he was contributing $5 million to a marketing campaign urging bitcoin to abandon its energy-guzzling mining infrastructure, which proponents insist is essential to keeping the network secure and fair.
Now bitcoin supporters are building their own political apparatus. This year, David Zell, a bitcoin advocate, started the Bitcoin Policy Institute, a think tank that drives a pro-bitcoin agenda in Washington. The institute has argued that concerns over bitcoin’s energy consumption are exaggerated.
“What we’re saying is that bitcoin has a set of characteristics that make it unique,” Zell said. “These differences are stark enough that if you’re going to have a serious policy conversation around the industry, it’s useful to draw that distinction.”
This article originally appeared in The New York Times.
