Chain Smoking to Babylon
Google the word "alpaca" today, and your first search result won't be for the South American camelid. Instead, it will link to alpaca.markets, a cryptocurrency and stock trading API platform. Launched in 2017, the company's name seems to reference a Bitcoin meme that started in 2011, when the currency was new, cheap, and facing reasonable questions like: What can you buy with it? An early answer was alpaca socks, specifically those from Grass Hill Alpacas, a small family farm in Western Massachusetts. David Forester, a young man whose parents owned the farm, began selling the socks in February of 2011 for 75 Bitcoin per pair when Bitcoin was worth less than a dollar and struggled to keep up with demand. So the alpaca socks may have been the community's first meme purchase, long before Cryptobros started inexplicably buying Tungsten cubes. The same year, Liberty Dollar creator Bernard von Nothaus was convicted on counterfeiting charges, with the U.S. Attorney for Western North Carolina Anne M. Tomkins declaring to the press: "Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism." In response, early bitcoin adopters started calling themselves "alpaca-sock-wearing-crypto terrorists." But given the rapidly accelerating crypto market crash, what makes the Alpaca connection more interesting than an old meme is the striking similarities between the crypto and alpaca economies: two markets that could only ever be profitable as decentralized Ponzi schemes, two speculative bubbles, one of which is popping now, and the other which catastrophically burst in 2008, just as the first Bitcoin was mined.
At the peak price of Bitcoin last November, the proceeds from one pair of Grass Hill Alpaca socks sold in February 2011 would be worth over 5 million dollars, meaning David Foster is likely the only American farmer in history to have profited a single dollar from the sale of Alpaca fiber. First imported from South America in 1984, the only profitable product Alpacas in the United States have ever been capable of producing are more Alpacas. According to a 2006 UC Davis study by researchers Tina Saitone and Richard Sexton, the initial rationale for the focus on breeding stock was creating a national herd large enough to sustain a viable fiber market, although this never happened. As they point out, the Alpaca Owners and Breeders Association (AOBA) and its official registry undertook steps to limit supply in 1998, restricting the registration of Alpacas to those with documented heritage, effectively banning registration for Alpacas imported from South America under the dubious premise of protecting the national herd's gene pool. This was an immensely consequential decision in the U.S. Alpaca market, where 99% of Alpacas were registered, and those which weren't were nearly impossible to sell. Nearly ubiquitous registration is rare in the livestock industry and would not be necessary in most markets producing a viable agricultural product. Consumers do not particularly care whether or not the cow that produced their cheeseburger has a pedigree. The registry also banned the use of "non-traditional" breeding methods, including artificial insemination and embryo transfer, for seemingly no other reason than to prop up the price of breeding stock. (These methods are utilized in nearly every other livestock industry in the U.S., and near-ubiquitous in some, like dairy). Controlling over the supply side of a product with little to no inherent economic value is also part of the crypto economy. NFTs are the most obvious example, but the same is true with currencies. Bitcoin, for example, was designed to hit a wall. No more than 21 million bitcoins will ever exist. The supply constraint strategy worked for the Alpaca industry, at least for a while. By 2004, the acquisition cost of an average female was between $12,000 and $25,000 and between $20,000 and $50,000 for a herd sire.
