F. Scott Fitzgerald doubted whether there were any second acts in American lives. Not only is Charlie Shrem at age twenty-eight already on his second (or third), he can tell you precisely what the intermission was. That would be the period, from March 2015 to March 2016, that he spent in federal prison after pleading guilty to helping a customer of his first startup, BitInstant, acquire bitcoins to resell to users of the online black market Silk Road.
That simple act of rebellion—against the law, against his cofounder’s wishes, and, many would say, against good sense—has become the stuff of bitcoin legend. It is hard to overemphasize just how small was the bitcoin community when Shrem joined or just how large was his profile once within it. He launched BitInstant in 2011 and swiftly established it as vital infrastructure in the burgeoning crypto economy. The following year he cofounded the industry’s first advocacy group, the Bitcoin Foundation.
“You talk to 10 people,” Shrem once boasted, “I guarantee you at least seven of them will say they got their first bitcoin from BitInstant.”
Eventually the rocket he was riding sputtered out. When he got out of prison, he had months of new developments to catch up on and a fortune to rebuild. And he was done with New York. He moved to Florida, where he now lives with his wife in a house on an island in Sarasota Bay. (Their home, set on nearly an acre of land, has a gated entrance, and Shrem—privacy-conscious like so many of the crypto rich—prefers that the island not be named.)
Since then, he has served briefly as the chief technology officer of a failed startup called Intellisys Capital and as the head of business and community development at Jaxx, a crypto wallet provider run by Ethereum cofounder Anthony Di Iorio. Shrem’s latest venture is Crypto.IQ, an advisory firm that helps clients trade in digital assets.
As a founding partner and “chief visionary officer,” Shrem pitched Crypto.IQ to potential clients as a way to get “access to my brain”—complete with newsletters, trading alerts, and recommendations for which coins to invest in and which scams to avoid. (Early subscribers could get 25 percent off by using the coupon code “CHARLIE.”)
The service now has thousands of subscribers, with a retention rate of better than 80 percent, he says, and twelve employees working out of an office in downtown Sarasota. Shrem himself typically works only from eight a.m. to one p.m. each day. “I normally try to keep Charlie’s business calls to the morning,” Crypto.IQ’s director of services told me, as I was making arrangements for this interview.
Shrem is wise enough, these days, to know how much he still does not know. But the old braggadocio comes out when he is challenged. When he launched Crypto.IQ last December, some wiseacre on Twitter scoffed: “You are a smart guy, Charlie, but are you really ‘the world’s most sought-after crypto expert’?” Shrem shot back: “I would think so. You should see the emails I get.”
I caught up with Shrem to pick his brain about stablecoins, crypto governance models (spoiler: he thinks bitcoin’s approach is best), the bear market in digital assets, and his future ambitions. He was, he says, gazing out at the water as we talked. What follows is our interview, which has been edited for length and clarity.
Your life has had a lot of twists and turns. When you look back over the past seven years, do you see an upward trajectory?
If I look at it from a seven-year trajectory, it’s definitely been increasing on all the metrics. Just as the crypto markets go through bull and bear [periods], my personal life goes through bull and bear markets too. So the key is how to deal with it when you’re in the bear markets. I dealt with one really bad one [being in prison], and hopefully I’ll never have to deal with something like that again. But there are other things, just small things that we’re dealing with; things that life brings at us.
Tell me about Crypto.IQ. What do you guys do, and why did you start this business?
I wanted to get back into education. It’s what I love to do. I saw a lot of stupid, scammy pump-and-dump groups, where you pay them a lot of money and they claim to give you trading signals. And I said, ‘That’s not really the best way to represent crypto to mainstream people.’ But I also didn’t want to be one of these content mills that posts low-quality content that no one reads. CoinDesk has their research [arm], and they charge a lot of money for their research reports. So we did the same thing—we have two tiers [of membership]: a $60-a-month tier and a $250-a-month tier. We put out research reports on different coins and tokens, different projects. We put out a 34-page newsletter every month, which is like a magazine in and of itself.
A Crypto.IQ report late last year declared that “The time has come for the wise to make money”—perhaps even generational levels of wealth. You guys seem to pride yourselves on your ability to read the markets and tell winners from losers. But everyone, as the saying goes, looks wise in a bull market. Did this bear market take you and your partners by surprise?
It’s been really good, actually, because my traders lack emotion. One of them worked at Goldman Sachs and the other was a day trader out of his house. For example, last night [September 3, 2018] we posted a short trade, and we told everyone, “We’re opening a [bitcoin] short at $7,400 and closing it at $7,000.” And we were right. Not always are we right, but in that situation we were. We have a trading chat-room here, and there is constant conversation going on with our staff and our members. Bull or bear, it doesn’t matter, you’ll make money—if you’re good.
What do you think of the role of Tether? Was the market artificially inflated last year during the crypto mania?
No, I don’t think so. A lot of people come out against Tether, and they write all these articles about it. Every one starts with the same statement of fact—that Tethers are created out of thin air and there’s no basis for the creation of Tethers. But that’s false.
When you want to buy large amounts of bitcoin or ether or any crypto, one of the best ways to do it is to call up Bitfinex’s [over-the-counter trading] desk. They’re going to do one of two things: either they’re going to sell bitcoin to you directly, or they’re going to sell you Tether that they have in their wallet. Every so often, they have to replenish their wallet, and that’s when you see Tethers get printed.
So you believe the reports from people who claim to have seen the company’s bank account and say that the company actually has all the money to back up the Tethers that have been created?
Absolutely, yes. I do.
Does the extreme volatility of last year’s crypto mania and this year’s bear market demonstrate a need for—or at the least the usefulness of—stablecoins? What do you think of the concept, and which ones do you find worthwhile?
The whole concept of a stablecoin is difficult. Because you have to rely on a third party for a stablecoin. You have to rely on the company for Tether. If Tether Ltd., or whatever they’re called, disappears, then Tether ain’t worth jack shit. That’s kind of the fallacy of it. But at the same time, stablecoins do serve a purpose. They allow people to go in and out of crypto without having to go back into fiat [currency]. A lot of times, people want to “go flat.” Like right now, I think the coins are going to go down, so I’m going to go flat, and then I’m going to go back in. That’s where stablecoins are important.
I think crypto is chugging along, doing its thing. The price is going up and down. Markets are free—you have the scammers, you have the hacks; you have the good stuff, the bad stuff. It's just doing its thing.
So they’re not important for commerce, but simply because their value doesn’t fluctuate like that of other cryptocurrencies?
No. Because you can’t force stability unless you have a counterparty. Eventually the coin will become stable in and of itself. The volatility of bitcoin is eventually going to go down, but it’s going to take a very long time. You don’t want artificial stability. Eventually you’re going to get to a happy medium, where buying and selling demand pretty much counterbalance each other.
So at that point, wouldn’t it be tough for you guys to make money from trading the way you do now?
There will always be something to trade in the crypto market, whether it’s bitcoin, ether, or something else. Which one will become stable first, who knows. I think bitcoin will be more like a store of value, and not something you’d use in everyday commerce. But for that to happen, bitcoin has to [go] mainstream. Because although you don’t sell gold very often, you don’t use it for commerce. At any given time, you can sell your gold for a market value within a few hours anywhere you are in the world. To be a store of value, bitcoin has to get to that point.
The government took a light-touch approach to the internet partly because the internet proved to be useful for so many people. Someone recently said to me that the best way for the blockchain industry to proceed under the threat of bad laws or regulations is simply to build great products that people want to use. How long before we see mainstream consumer acceptance and use of cryptocurrencies?
I think there’s a long way to go. I’m not 100 percent sure [what the intermediate steps will be]. I think bitcoin will just need to exist long enough for people to see it as an asset class that’s not fleeting. And once they believe that, they will be willing to hold some of it—like real estate, gold, silver, art. It is [also] something that you want to create amazing applications off of. But the comparison to the internet is not really a good one, because they serve two very different purposes. Crypto is as revolutionary [as the internet], if not bigger. But one is your money, the other is information.
It sounds as if you still hold that original mindset of cryptocurrency being primarily a means of democratizing finance, allowing people to be their own bank, rather than talking about it the way that, say, ConsenSys talks about it—”We’re going to tokenize everything and create all these decentralized apps.”
I’m more of a purist. Those Consensys guys, I applaud everything that they’re doing for the mainstreaming of Ethereum. But they got involved a little bit later than me, [and] for different reasons. When they all got involved, bitcoin was already taken seriously in tech circles. Even though Ethereum didn’t exist yet, [bitcoin as a] proof of concept was there, and they jumped at that proof of concept. I got involved for different reasons, like censorship resistance.
What is the biggest challenge facing the crypto community right now? Is it legal or regulatory issues, technical challenges, social acceptance, or something else?
I don’t think there are challenges. I think crypto is chugging along, doing its thing. The price is going up and down. Markets are free—you have the scammers, you have the hacks; you have the good stuff, the bad stuff. It’s just doing its thing. I don’t really see issues. There’s nothing negative at this point.
You don’t think the community is under threat from lawmakers or regulators?
Bitcoin exists everywhere. It’s physically impossible to take control of it. It’s physically impossible. I don’t know how you would.
As this ecosystem evolves, we’re starting to see different governance models emerging for various crypto projects. Which ones do you think are promising?
I’m still convinced that the best governance is [the] lack thereof. A lack of governance. [That] doesn’t imply no governance. The way bitcoin was built, it’s completely open source and you can’t have any one party control it, and if you want to have a say in it, you’ve got to be able to put up the mining equipment and pay to play, or run a company in the space.
You said recently that the children of today’s digital natives will “be unable to imagine a world without it, just as we can’t imagine a world without the internet.” What do you think that world will look like?
You’ll still see hyperlocal currency, because people see currency as a unit of pride. They see currency as a nationalism thing—to represent their culture and who they are. But it will be a lot more difficult for governments and corporations to manipulate things for themselves—not that they won’t try, but it will be a lot more difficult. Markets are efficient when we allow them to be.
There was a line I came across in a Crypto.IQ report. It said that “Michael Novogratz and Peter Thiel, among other billionaires,” consult with you on a regular basis. Is that true?
Yeah, they do, actually. Especially Novogratz’s group—we know their staff and we work with them. I don’t know if I’ve ever worked with Peter Thiel.
Your company BitInstant was once responsible for 30 percent of all bitcoin transactions, and your ambition was for it to become “the Apple of Bitcoin.” Will you ever go back to running or working for a company like that, or has the landscape changed too much?
I think about that a lot. I don’t know the answer right now. I’m still 28. Maybe [seven] years from now, when I’m 35, I’ll try to become the president. I have a lot of learning to do, a lot of people to learn from. I have to learn how to build a company, how to build relationships. I’m going back to school—not physical school. But I’m going back to learning, which is what I’m doing here with my partners and my company.