How S.F. successfully evaded the crypto crash

‘The volatility doesn’t affect us. We’re not traders’

As cryptocurrency coin prices crash down in scary, jagged lines on TV and computer screens around the globe, Adam Jackson remains unfazed, helping hundreds of thousands of people find work.

Jackson is the cofounder of Braintrust, a nonprofit talent network that uses cryptocurrency to connect freelance workers with companies. Workers using Braintrust get paid in dollars, not cryptocurrency, but it is used to secure gigs and reward users. Last month investors put $100 million into that cryptocurrency, which is worth about what it was a month ago, before the latest wave of volatility.

Braintrust is an example of how the highs and lows of cryptocurrency prices are tied to many San Francisco crypto companies, but only loosely. The overall industry here does not rise and fall with the price of Bitcoin, which has gone in the past four months from around $41,000 to $68,000 and back down to the current price of around $38,000.

“The volatility doesn’t affect us. We’re not traders,” Jackson told The Examiner. Comparing Bitcoin, the plummeting and most widely used cryptocurrency, with Braintrust is like “comparing a gold coin with Linux,” the open-source computer operating system, he said.

Cryptocurrency gleams with the promise of gold, evaporates bad investments and baffles outsiders. Some say it’s the future of money; others that it’s a complete rip-off. Crashing prices of Bitcoin and other tokens can seem to confirm cynics’ suspicions that the whole thing is a trend not even worth understanding.

That is not true here. In San Francisco, some nonprofits like Jackson’s, and companies large and small are working on the challenges of hybrid work, climate change and better ways of sending money to refugees. Tech workers are writing code they believe will change the world. Smart investors are demanding real business plans. An industry rooted in hardworking reality is taking shape.

Rip-offs certainly do abound, but market crashes actually help to wash them away. A crypto industry being built here has deep roots and a strong future, experts say.

“There’s a big difference between speculation and utility,” said Cory Johnson, a former business journalist who hosts the “The Drill Down” business podcast and is an expert cryptocurrency commentator. “Silicon Valley is building businesses using cryptocurrency and blockchain that have utility,” Johnson told The Examiner. “They’re not trying to find someone stupid to buy their tokens at a higher price.”

Cryptocurrency is digital money built on encrypted computer code called blockchain, which records transactions. The price of Bitcoin and other leading cryptocurrencies has plummeted recently, in part because the Chinese government banned cryptocurrency use in the world’s largest economy. That enormous setback tumbled a skyrocketing crypto bull investing market that poured $30 billion into cryptocurrency last year, according to data cited by Bloomberg.

Think about it this way. San Francisco’s cryptocurrency industry is building companies and nonprofits that are like machines. The candy inside the vending machines is cryptocurrency. The cost of the candy, or the price of different cryptocurrencies, goes way up and way down. Some people, cryptocurrency traders, stand around the vending machines all day, hoping to buy candy when the price is low, and sell it to somebody else when the price goes up. Right now, the candy isn’t worth as much and people who bought it when the price was high are not happy.

Some vending machine makers are deeply affected by the price of the candy. The stock price of the publicly traded San Francisco companies Robinhood and Coinbase have recently hit all-time lows as the tumbling price of Bitcoin and other cryptocurrencies dropped by half or more. The value of those companies is closely tied to Bitcoin and other cryptocurrencies.

But many other San Francisco cryptocurrency companies don’t make the equivalent of vending machines. They make chocolate mixers, and sugarcane harvesters and confection conveyor belts and candy coolers. Does the price of candy affect them? Sure, long term. But their daily life? Not much. And others make entirely different kinds of machines that don’t have anything to do with candy.

Braintrust and Ripple, a private 500-person San Francisco company valued by PitchBook at $10 billion, “are businesses with actual uses,” Johnson told The Examiner. “They’re not tokens with funny names and promotions where the price goes up and down depending on tweets.”

Ripple supports fast, low-cost international payments. Despite highs, lows and significant legal challenges, it remains one of the biggest cryptocurrencies in the world. The company did not immediately respond to a request for comment.

Jackson grew his nonprofit Braintrust in the trendy coworking space Shack15, which looks out on sweeping views of the San Francisco Bay. Johnson records his podcast and meets with crypto leaders there. At a time when tech campuses in The City are mostly empty, Shack15 is often filled with talk about the future of money.

Next to Johnson’s space in Shack15 is the crypto startup Skale Labs. Jack O’Holleran, CEO of the 35-person startup, called Shack15 “a nice place for people in the crypto industry.” The cryptocurrency entrepreneurs there have not been out on the ledge of the Ferry Building as token prices tumble, O’Holleran said.

“There’s definitely a sense of remorse for people who hold the tokens,” O’Holleran told The Examiner. “But it takes five to 10 years to build a new internet. Real builders are not looking for the quick buck. The whole Bay Area scene is really rooted in those values.”

There is even a silver lining to price drops in cryptocurrency, O’Holleran said. “The people looking for quick money go away. That actually helps us. It’s hard to win in the echo chamber of a bull market.”

Gene Hoffman, chief operating officer of the Redwood City cryptocurrency startup Chia Network, agrees. “This category has a high charlatan ratio,” Hoffman told The Examiner. “Downturns shake out the Ponzis.”

Chia’s cryptocurrency token price settled into the $200 range last spring after briefly spiking to around $1,600 when it was released. This week, the price of the Chia coin was around $80.

“It’s annoying,” Hoffman said. “I would like our coin price to be higher. Does that change what we’re doing with the World Bank? Not at all.” In November, Chia launched a program with the World Bank and Costa Rica to build a blockchain network that tracks greenhouse gas emissions to help nations achieve the climate change goals of the environmental Paris Agreement pact.

“These technologies are going to solve real world problems,” Hoffman said. “That’s independent of coin price.”

Founders of crypto startups can’t get too caught up in the drama of market plunges, said Ophelia Snyder, co-founder at 21Shares, a company that facilitates trading of crypto currencies. “The crypto market moves incredibly quickly both in terms of value speculations and markets as well as in terms of the underlying technology,” Snyder told The Examiner in an email. Companies in the industry need “the resiliency necessary to withstand the market fluctuation and not let it distract from the progress made on important technical and infrastructural issues.”

And despite the ubiquitous charts showing plunging crypto coin prices, many experts believe even the prices will come around eventually. “In the long term, we remain bullish,” Robert Le, senior emerging technology analyst at PitchBook told The Examiner in an email. “There are massive opportunities to disrupt multiple industries.”

Meanwhile, many companies in the San Francisco crypto community work on projects just tangentially related to crypto coin prices.

“I don’t think anyone understands this emergent industry,” said Jackson. “It’s like the late ’90s when all the tech stocks would trade together. It took 10 to 15 years for people to learn that what Microsoft does doesn’t usually affect Google and Apple.”

Adam Jackson is the cofounder of Braintrust, a nonprofit talent network that uses cryptocurrency to connect freelance workers with companies. (Braintrust photo)

Adam Jackson is the cofounder of Braintrust, a nonprofit talent network that uses cryptocurrency to connect freelance workers with companies. (Braintrust photo)

Cory Johnson, host of the podcast “Drill Down,” and a cryptocurrency expert, in the San Francisco Ferry Building, where he and others in the cryptocurrency world work and gather. (Cory Johnson photo)

Cory Johnson, host of the podcast “Drill Down,” and a cryptocurrency expert, in the San Francisco Ferry Building, where he and others in the cryptocurrency world work and gather. (Cory Johnson photo)

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