Who doesn’t love a good breakdown of how Bitcoin works? Barry Silbert, CEO and Founder of SecondWatch, recently broke down the development and strengths and weaknesses of investing in Bitcoin at a recent MarketWatch event. Silbert, speaking candidly with other digital currency experts, defined the “5 phases” of Bitcoin development:
1. 2009 – The open source code was released, when hackers and interested hobbyists began playing around with Bitcoin.
2. 2011-2012 – Early Adopter Phase. The value shot from practically US$0 to US$30, Silk Road crashed and kicked off the early adopter phase. Early angel investors begin to get involved.
3. 2013 – Venture Capital Phase. Bitcoin investing became popular in Silicon Valley. Investors and successful firms begin backing Bitcoin. Venture capital firms have a focus on Bitcoin, there is just not an abundance of fundable entrepreneurs and scalable businesses. 4. 2014 – Wall Street Phase. The upcoming months will see a large amount of money coming from Wall Street into Bitcoin as a tradable asset class and investment product. Heavy research is being conducted on the fiscal future of investing in Bitcoin.
5. The Future - Mass Consumer Adoption Phase. Outstanding products and services to buy and hold Bitcoin are essential, courtesy of phrases 3 and 4. The monetary base of US$8 billion rising is imperative. It is too insufficient to support a global payment platform. The Wall Street phase should skyrocket the monetary base.
Silbert’s claim of Bitcoin being less than half a year of way from receiving a shot in the arm from Wall Street will surely raise a few eyebrows of Bitcoin enthusiasts and skeptics. It might be tough to argue with his wild success at SecondMarket. The New York-based company, which generated $35 million in revenue in 2010, acts mainly a marketplace to trade shares of nonpublic companies and is planning to open the first entirely American Bitcoin exchange.
Silbert, along with Mark Williams, Boston University Executive-in-Residence, and Todd Harrison, CEO and Founder of Minyanville Media inc., gave practical analyses of the future of Bitcoin in the investment world.
Williams described the Bitcoin currency (“the locomotive”) and the payment system (“the track”) as inseparable from one another. Over the past couple of years, financial experts have been working to find a balance when improving the security of both the “locomotive” and the “track,” citing Mt. Gox as an example.
Likewise, Harrison remarked “the leaders coming out of a crisis are rarely the same leaders that enter a crisis.” Harrison believes if that Bitcoin can adapt and evolve enough to solve the problems caused by the Federal Reserve and other fiat currencies, as well as overcome within Bitcoin’s own domain, then the future looks mighty bright for the digital currency.
Silbert perhaps put it best when he bluntly summed up the potential future of Bitcoin:
“It [Bitcoin] is either going to be this global currency…this global payment system, this global money transfer network, or it’s not. And from an investment perspective, it is pretty much the highest risk/highest return investment you can possibly make, because it is either going to be 0 or it’s going to be many times your investment.”
If we are indeed in the Phase 4 of Bitcoin’s evolution, these kinds of sobering analyses should become a larger part of educating the masses about Bitcoin as an investment. Newcomers should never feel like they are being sold something when they adopt the digital currency. Silbert, Harrison, and Williams certainly made that clear.