It turns out cryptocurrency might not be the best way to build a campaign war chest.
As campaigns vacillate on whether to open their digital wallets to cryptocurrency donations, they might take warning from an unlikely source.
The congressional campaign for Ron Watkins—the man widely believed to be the mastermind behind the QAnon conspiracy theory, and currently a Republican House candidate in Arizona—has reported a 27 percent loss on Bitcoin investments during his first six months as a candidate.
Watkins, a crypto enthusiast, received a letter from the Federal Election Commission this week with questions about the source of donations in his first-ever campaign finance report, which he had already corrected once. While his fundraising was still sad—a total $51,000 for a man who once allegedly commanded an internet army—the new amended filing, submitted last week, revealed tens of thousands of dollars in previously unreported contributions.
Among those previously unreported donations were two Bitcoin gifts totaling $1,255. But, the filing also noted that 27 percent, about $342, had already disappeared due to a crash in the value of the currency.
The crypto market’s inherent volatility comes with extra headaches in the political world, because the FEC, wary of the unregulated and murky digital currency, still doesn’t treat cryptocurrency like currency. Instead, crypto donations are reported as in-kind contributions, like a private flight or a porn-star payoff. Additionally, donation amounts haven’t been officially sanctioned at higher than $100—though they haven’t been officially capped, either.
That “in-kind” label creates an extra step—liquidation. Political committees have to report the value of a crypto gift as market value at the time the donation is received, but, importantly, they can’t just spend it. If they want to actually use their Bitcoin, they have to take another step and convert it into dollars first—like with a stock.
But because cryptocurrency is so much more volatile than stocks, the lag between donation and conversion can make a big difference. And that’s what the Watkins campaign found out.
When Watkins first filed to run for Congress, on Oct. 17, 2021, Bitcoin was valued at around $62,000, and just a few weeks later hit its all-time high of over $68,000. But by Dec. 31, when the Watkins campaign assessed its final holdings on the year, crypto markets experienced a series of wild swings and crashes, and Bitcoin had fallen about 25 percent.
In other words, if Watkins held on to a $100 Bitcoin donation in October, it would have been worth $75 at the end of the year.
But Watkins’ two Bitcoin donations came at a particularly bad time—just ahead of a December “flash crash” that wiped nearly 20 percent of Bitcoin’s market value. This was also around the time Watkins announced a new Bitcoin campaign donation model, involving a website that “you might or might not be able to find,” though he assured supporters “it is real.”
“The point of this is to prove to the haters that we can raise money and we can win this,” Watkins said.
It’s impossible to say how many candidates have decided to accept Bitcoin, and poorly understood reporting requirements make it difficult to know for sure how many have received contributions, though experts agree that the number has ballooned in recent years. And of all those committees, the Watkins campaign appears to be the only one to have reported an itemized loss on its Bitcoin donations, according to federal records. And that fact suggests that even crypto’s biggest backers in Congress aren’t comfortable trusting their investment to the temper of the market—that is, they’re far more inclined to liquidate immediately, rather than hold and hope they’re carried to the moon.
For instance, take Blake Masters, a far-right Republican candidate vying for Senate in Arizona and a longtime vocal crypto advocate.
Like Watkins, Masters went on a crypto fundraising spree in December. Instead of holding those donations, however, Masters cashed out as quickly as possible—yet the market was so volatile that even he still lost value.
In late December, Masters offered supporters the chance to buy an NFT version of a 2014 book he’d co-written with his billionaire tech backer and boss, Peter Thiel. For the sale, Masters created 99 NFTs—digitized, unique collectible items tied to some type of cryptocurrency—and put them up for $5,800 a pop, the equivalent of a maximum campaign donation. They sold out in three days, netting the campaign almost exactly $574,200, or more than a third of its receipts for the fourth quarter.
Or, it should have netted that much. A look at Masters’ campaign filings from the time shows that in that three-day period, his committee received and converted more than $165,000 in crypto donations to cash. But over those 36 hours, cryptocurrency markets crashed hard. Masters more often than not cashed in donations below the $5,800 amount, with a few even splits, and sending $1,132 in processing fees to Coinbase.
And while the Masters campaign has accepted digital currency since September—around the time he suggested the United States respond to China’s crypto crackdown with a “strategic reserve of Bitcoin”—he appears to have received no crypto contributions until the NFT blitz three months later.
The Watkins and Masters campaigns did not reply to a request for comment.
It’s unclear whether the trend will continue. Masters has announced another round of NFTs, this time sold in “packs” of various amounts, at a range of prices. But unlike the first round, the campaign store this time doesn’t offer donors the chance to automatically link their crypto wallet. Instead, it offers credit card or Apple Pay, options. Supporters who want to donate with crypto first have to send a special request by email or text message.
This means that this time around, Masters will get all the cachet of the blockchain, with the reliability of good old dollars—and the risks will fall to his donor-investors.
He’s not alone. Earlier this month, Bloomberg reported that political donors in the crypto industry still prefer to give in dollars, with total crypto contributions below $600,000 in 2021—making Masters’ haul one of the biggest by far.
Turnoffs include cumbersome reporting requirements and illiquidity, Bloomberg reported, with the conversion requirement creating a layer of inconvenience. And without an overhaul from the notoriously sluggish FEC, the administrative and opportunity costs associated with crypto will still make the digital currency more trouble than it’s worth—though younger candidates will no doubt continue to wag it as a cultural banner, even if they don’t see any return.
(The FEC appears to have taken one step, omitting the previous $100 limit in its candidate guide last year.)
As for Watkins, the public will not know if he’s still “HODLing” his Bitcoin until his next campaign finance report, due in April. But after the crashes last year—including one “flash crash” in early December that erased nearly 20 percent of Bitcoin’s value—Bitcoin still hasn’t broken $50,000. It currently sits almost exactly where it did on Dec. 31, the day he reported his unrealized loss.