Is This The Turning Point For Bitcoin?
Many people have called Bitcoin a bubble. They have compared it to the infamous tulip mania. In our four phases of a bubble chart, they would probably say that last April (when Bitcoin’s price hit over $200) was the “mania” phase and that we’re now in the “blow-off phase.”
Fred Wilson, who’s got a bit of a track record of investing in companies that seem too silly but later become mainstream, described his thoughts on Bitcoin in a post on the USV blog about their latest investment in Coinbase in this way:
“We believe that Bitcoin represents something fundamental and powerful, an open and distributed Internet peer to peer protocol for transferring purchasing power. It reminds us of SMTP, HTTP, RSS, and BitTorrent in its architecture and openness. Like what happened with those other low level protocols, entrepreneurs and developers are now building technology on top of Bitcoin to make it more useful, more accessible, and more secure.”
This makes a lot of sense to me. The benefits of a truly global, zero transaction fee, digital currency are too powerful to ignore. And the more people develop on top of the network, the more liquid, secure, and stable Bitcoin will become.
Fred is also quick to point out that it’s not just Bitcoin. If other or multiple digital currencies get massive adoption, then these startups will adapt and support them too.
And USV isn’t alone. Andreessen Horowitz, Jeremy Liew, and a lot of other smart people are thinking about Bitcoin, digital currencies, and the startups that will power them. Even Paypal is thinking about ways to work with Bitcoin.
The most exciting part of this ecosystem to me is the payment layer. And this is where Coinbase really excels. They are making it very easy for merchants to accept bitcoin payments.
I have no idea about the future price of Bitcoin and where it stands in the four phases of a bubble. But to me, this sure looks like the start of a long-term trend for Bitcoin startups.
I think Howard said it best:
“But, as a risk taker myself, I like to see this type of setup. Not too early for Fred, but way too early for Warren Buffett.