Wesley Thornburgh, a portfolio manager from Chicago, found himself the odd man out at an experimental bitcoin auction at the New York City Bitcoin Center, which is seeking to become the world’s first regulated bitcoin exchange.
“I feel like I’m the only person here who doesn’t have a background in IT,” said Thornburgh, in a well-tailored suit, when he was standing among casual-dressed bitcoin investors. But he is among the growing Wall Street crowd who are turning to bitcoin for a profitable investment option.
In the center’s large lounge in the very heart of Wall Street, several dozen people crowded around a man standing on a high podium, joining in what looked like an auction.
“610 bid, 620 ask,” the man shouted. “Now it’s selling at 640 a bitcoin.”
A bell rang, followed by a transaction price on an overhead projector. A deal was done.

Thornburgh, of Overlook Fund L.P., spent the early years of his career in Asian emerging markets during the 1998 currency crisis, and went through the Great Recession 10 years later. He attended the auction with the seriousness of a veteran investor who sees opportunities in this unconventional currency.
“I was very familiar with how the policies can destroy the currencies,” he said. “I also see a lot of bad policies with the dollar… The more I look into bitcoin, the more I’m impressed by how rapidly it’s been adapted by retailers and investors.”
Bitcoin, a virtual currency, initially drew attention from the technology sector, but now investors are getting involved, despite economists’ skepticism. The rise of bitcoin and its community bear resemblances to Occupy Wall Street in a way that investors and people, frustrated by the financial crises and the way central banks handle them, take actions. But rather than pouring into demonstrations, the technology and finance people, with sophisticated tools in hand, turn to bitcoin to break away from the traditional rules of game.
George Urakhchin, 25, a new bitcoin investor, is among those who argue that governments should take a hands-off approach to financial markets.
“I strongly believe that money shouldn’t be a function of the state,” he said.
“It’s pretty much financial freedom, financial privacy.”
Every other currency is issued by a nation’s central bank, which, together with the commercial bank network, empowers and controls transactions. Bitcoin has none of those characteristics, which gives users the freedom to trade, said Payu Harris, founder of the Kimitsu Digital Technology Initiative and an activist for the Bitcoin Center.
“It’s a win-win for all involved,” he said. “It’s fantastic because you have people acting on their own, on their own regulations, on their own behalf.”
Without going through the banking system, bitcoin transactions do not require fees. The transactions are private, confidential, untraceable and anonymous. Investors, small businesses, and self-employed people have joined the bitcoin movement for this reason.
Introduced in 2009 by a person or a group with the alias Satoshi Nakamoto, bitcoin refers to two subjects with the same name. On one hand, it’s a technology for non-banking transactions. On the other hand, it operates as a currency – like the dollar or the euro – without physical existence like coins or notes.
People can buy anything from from pizzas to houses with bitcoin, as long as the sellers accept it. The value of the payment will change as bitcoin value fluctuates in the market. In this sense, bitcoin is similar to gold. The currency’s value rose to a record of $1,242 per bitcoin last November, more than an ounce of gold, before retreating to between $630 and $640 recently.
Bitcoin technology is an electronic cash system built on the peer-to-peer network, where each user shares a portion of his database with other participants. People using this network are directly connected, instead of going through the central servers in the traditional system.
Bitcoin, the currency, is created through a process called “mining”, in which participants validate new transactions, or doing a series of mathematical puzzles to support the shared network, said Nakamoto in his bitcoin proposal in 2009. Bitcoins are the result of resolving the puzzles, also the rewards for such “community service.”
Investors would buy bitcoins directly from the “miners” by online negotiations, on the exchanges where the prices are matched in the same mechanism as on the stock exchange, or simply receive bitcoins as a payment for products, said Harris, the activist.
The Bitcoin Center recently introduced machines with which people can buy bitcoins with their cash – in U.S. dollar and dozens of other currencies. To buy bitcoins from it, people set up “digital wallets”, similarly as they open bank accounts and input their dollar notes in the bitcoin machine like using any vendor machine. The internet-connected machine will note the number of bitcoins purchased in their digital wallets.
Despite the worldwide enthusiasm for bitcoin, economists do not believe this unconventional currency can operate simultaneously with the official currencies. It will be short-lived, said Russell Price, senior economist at Ameriprise Financial Inc in Detroit.
“It needs the government’s credibility and the central bank’s support in order to survive,” he said in a phone interview. “But I don’t think it’s going to get that.”
China and Russia are among the first nations to ban the transaction of bitcoin for fear of a turbulence in the financial system and security issues. Several U.S. Congress members have sought to ban the currency, but the Federal Reserve said it has no authority to control bitcoin. A central bank can only monitor the currency it issues.
The existence of a currency depends on people’s confidence in it. In this aspect, Thornburgh, the portfolio manager from Chicago, said he believes the confidence in bitcoin will just grow.
“It’s gonna grow much bigger and much faster than anybody realizes.”