As one the most active venture capitalists in the industry (with investments in over 30 Bitcoin-related companies through the Bitcoin Opportunity Corp.), Mr. Silbert has gone all-in on Bitcoin-related businesses.
Barry believes the rise of Bitcoin from 2009 till present is just the beginning of the new era and the virtual currency may be approaching a big inflection point as Wall Street takes the baton from Silicon Valley. He thinks about Bitcoin adoption in five general phases:
- Experimentation Phase (2009–2010): No real value associated with Bitcoin. Hackers and developers playing around with the source code. Experimenting with Bitcoin as a medium of exchange.
- Early Adopters Phase (2011–2013): Interest from investors and entrepreneurs started to grow with substantial press coverage in the wake of the Silk Road bust. First generation of Bitcoin-related companies (exchanges, merchant processors, wallet providers, etc.) started. Potential began to shine through poor management.
- Venture Capital Phase. (2013–Present): World-class VCs started investing in Bitcoin companies and rapid ramp-up is already outpacing the early days of the Internet. VCs poured more than $90 million into Bitcoin-related businesses in 2013 and more than $300 million in 2014 (compared to $250 million invested in Internet-related businesses in 1995).
- Wall Street Phase. (2015?): Institutional investors, banks, and broker-dealers begin moving money into Bitcoin. Rising price and volume (in addition to development of derivatives) become the catalyst for mass adoption as retail investment follows.
- Global Consumer Adoption Phase (?): Only happens if (i) companies continue to innovate and make it easier for consumers to buy, hold, and spend Bitcoin, (ii) volume expands dramatically so that large merchants can start accepting payment in Bitcoin, and (iii) Bitcoin awareness continues to rise with these developments.
If Mr. Barry is right, the rise of Bitcoin could be as transformative for finance as the Internet has been for commerce and communications and it could happen in the next few years.
John Mauldin is the Chairman of Mauldin Economics which publishes a growing number of investing resources, including both free and paid publications aimed at helping investors do better in today’s challenging economy.
Worth Wray is the Chief Strategist to John Mauldin and a contributor to Mauldin Economics. In addition to assisting John with global economic research, Worth is charged with translating John’s macro views into long-term themes and a general investment framework capable of participating in the global markets, profiting from creative destruction, and protecting against loss in periods of profound market stress.
The Bitcoin Investment Trust (BIT) is a private, open-ended trust that is invested exclusively in bitcoin and derives its value solely from the price of bitcoin. It enables investors to gain exposure to the price movement of bitcoin without the challenges of buying, storing, and safekeeping bitcoins.
Two weeks ago BIT syndicate won the 48,000 of the 50,000 bitcoins in the second Silk Road Bitcoin Auction held by the U.S. Marshals Service. The exchange’s syndicate, which received 104 bids from eight parties, won 19 of the auction’s 20 Bitcoin blocks. According to Bitcoin.info’s Bitcoin Price Index, the coins had a value of $16,8 Million at the time of publication, December 9th, 2014.
Tim Draper, an American venture capital investor and a founder of Draper Fisher Jurvetson, won 2,000 bitcoins at this auction. Draper previously won all of the 30,000 bitcoins auctioned by the USMS at its first bitcoin auction in June.
By the way, this year the question “What is Bitcoin?” was the 4th most popular “What is…” search on Google, beating last year’s rank of 10th most popular. Bitcoin was topped by “What is ISIS?”, “What is Ebola?”, and “What is ALS?” searches.
Considering that Google is the world’s most popular search engine, it’s difficult to deny that a lot more people have become interested in Bitcoin this year. Moreover, Bitcoin adoption grew significantly this year, bringing in big names like Microsoft, PayPal, Dell, Expedia, Stripe and many-many others.
“I think it is important to see significant growth in the daily USD transaction volume graph in 2015,” writes Dalton Caldwell on its blog. I have no idea what will happen to the price of a bitcoin in 2015, and could imagine the price going far lower/higher while the value transacted graph increases at a steady and somewhat predictable rate.”