Market Devices and “Folk Economics” of Crypto Currency

This paper explores social devices and organized activities embedded in the market making of “virtual currency”.  I present research findings drawn from an ethnographic study of the Israeli Bitcoin community and a netnographic study of the global Bitcoin community.  The Bitcoin market is embedded in anonymous, decentralized, de-territorialized, online system, and may be perceived as a “pure money” arena, because it depersonalizes transactions from social identity.   Trade in Bitcoin is risky, as it involves high degree of uncertainty regarding valuation, fluctuation, liquidity, and a lack of formal institutional regulation.    Rather than reducing perceived risk into probabilistic measures, market organizers use “alternative accounting” of various rhetoric devices, aiming at broadening imaginable time horizons of investments.  These techniques are accompanied by other devices: constructing advanced technical instruments, intensive face to face trainings in “tacit knowledge” to network users, by forming formal civic associations centered around lobbying,  negotiation with banks and regulators, supplying legal and other advices, and frequent community gatherings; all in order to promote market legitimacy and velocity.  

 A crucial market device is performed by constructing an imagined alternative monetary community, backed by online and offline relations.  Another key device is the assemblage of syncretic critical discourse, focusing mainly on the key role central and private banks play in generating endemic financial crises via “debt economy” and politically controlled economy.    More important, local discourse is composed of hybrid, incoherent fragments of libertarian, socialist, and anarchistic notions, stimulated by ties to a heterogeneous assortment of protest movements’ leaders and political actors.  Similar to the ideals portrayed by proponents of crowdfunding and peer-to-peer lending, Bitcoin is represented as a viable, “frictionless”, stable alternative to the ‘failed’ national monopoly currencies.   Market organizers and community activists portray Bitcoin as a “disruptive technology” of banking, a future pay system protocol which attracts start-ups companies, as a taxable commodity, and as a currency.  Current owners of Bitcoin are depicted  as “early adopters”, deem future gainers of the expected routine electronic currency trade.

 The emergence of alternative and complementary currencies.- especially other crypto-currencies - creates both legitimacy and competitive threat, which is reflected by ambiguous responses made by Bitcoin market’s organizers.     The practical materiality of Bitcoin is dependent on trust in virtuality, and acceptance of “Folk Theories” of economics, based on syncretic faith in conspiracy theories of banking and money supply, solved by smooth operation of algorithmic, mathematically driven, economic regulation.  An important social device is the construction “temporal fusion” between present investments and moralized and material future values. Market devices result in the framing of bifocal “fictional expectations” (Beckert, 2013) of utopian and material futures, which enable investors to perceive their investments as valuable, despite high levels of uncertainty, dramatic price and volume fluctuations, recurrent fraud cases, technical interruptions, institutional hostility, and public skepticism, An important device is a recurrent confusion between Bitcoin- as-a-currency vs. Bitcoin- as-a-technology.  These devices are aimed to frame the horizons of collective calculations of Bitcoin’s valuation.