Why would anyone invest in a Bitcoin startup instead of just buying Bitcoins?

Barak Ben Ezer

Barak Ben Ezer, Co Founder at Neema, a Bitcoin startup

Répondu il y a 246w

Two main arguments: 1) Timing. 2) Betting on bitcoin vs. betting on the future of digital coins/payment protocols.

1) Let's use the analogy to DNS in the early days of the internet, suggested by Chris Dixon from Anderson Horowitz in a recent wired article (Silicon Valley VC Thinks a Single Bitcoin Will Be Worth $100,000 | Wired Enterprise | Wired.com): "Dixon points to what has happened with another scarce but widely used internet resource. 'Domain names are an analogy,' he says. 'It would have been absurd to say in 1993 that domain names were worth $10 million each.' But now, that’s a reality. “Probably the best investment in computer history would have been buying domain names in 1993,' he says. 'Better than Amazon. Better than Google.' ”

So, if you had a time machine and could go back to 1993, taking $10K and buying thousands of 3 and 4 letter domain names, would outperform an investment in most or all internet startup. This wouldn't be so true in 2006, right? Same with bitcoin: if you traveled back in time to 2010 and buy them for a cents a piece, then buying the coins would outperform investing in any successful startup, perhaps excluding facebook when Eduardo Severin invested the first $10K.

Now, time machines aside, it's 2014, and you're bullish on bitcoin, what should you do, invest in a startup or the coin? Roughly speaking, early stage VC's expect a 10x return on investment on their successful startups. As of today, the price of bitcoin hovers around $759. Therefore, if you believe it stands a good chance to get to $7590 in the next 5-8 years, then perhaps you should buy the coin. If you're still bullish on bitcoin but believe that the price will stabilize lower at a point than $7590, then investing in a startup may be the wiser decision.

2) Bitcoin may mark the dawn of digital currencies with integral and inherent payment and clearing protocols. Digital currencies might likely transform our monetary, financial, and transactional system. But, bitcoin itself may be outshone by a newer and better digital currency. This underscores the case for investing in digital coin startups. While bitcoin could faze out to make room to the newer and better protocol, the startups can easily integrate with those newer coins/protocols. So, investing in a startup is better bet on the future of digital coins/protocols as a whole, rather than investing in bitcoin, which is a bet on a single coin/protocol.

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Fred Zimmerman

Fred Zimmerman, 30+ years in publishing & technology

Répondu il y a 80w · L'auteur dispose de réponses 2k et de vues de réponses 1.8m

This is more of an anecdote or parable than a logical answer, but it is a good story.

One of my most vivid financial memories is that in the mid 1970s my Dad, who was a university professor, decided to try investing a bit in the stock market. He bought some shares of a gold mining company called (if I remember correctly) Carborundum. Over the next few years I watched the family drama as he experienced the pain of seeing his investment lose a lot of its value, I think at least 60 or 70%. He finally sold and I am pretty sure he stuck to TIAA-CREF after that.

If he had bought gold in 1975 at $139.29 1975 price of gold and held, he would have approximately a 9x return today. I see that if he had invested the same amount in the S&P 500 in 1975, he would have had a 27x return. S&P 500 Return Calculator, with Dividend Reinvestment - DQYDJ

Moral of the story? Unless you have an information advantage, index funds are a pretty good buy relative to precious metals, and mining stocks carry a lot of risk relative to the actual thing mined.

PS — to take it a bit further — if you bought and held gold in 1971 at $35 before the Nixon Shock, your return today would be close to 36x, whereas the S&P return would only be about 22x. I see two morals there — one is that dates of entry & exit into index funds do make a big difference, which is why (if I understand correctly) regular balanced investment is important — and second that the time to buy Bitcoin would be right before a major regulatory change, like the US or EU adopting Bitcoin as equals to fiat currency. Which isn’t going to happen, but while there’s life there’s hope.

Leesa Daisy

Leesa Daisy, Avoir l'esprit d'entreprise

Mise à jour il y a 7w

Why would anyone invest in a Bitcoin startup instead of just buying Bitcoins?

Salut mon pote,

It’s a very good question. I think, may be you have an idea to start a business with bitcoin. right ?

“ Being a business owner is always better than just being a bitcoin users “

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Everyone wants to become an entrepreneur and wants to be a millionaire. Nowadays bitcoin business has higher concentration than other business. So people are very curious to start an investment in bitcoin business.

Starting a business is not a big deal. But choosing a right bitcoin business model is very important to retain your business success for long time. May I right ? Yeah… Because all bitcoin business are not giving high ROI.

I would like to suggest Bitcoin investment business to you to achieve tenfold growth in your business life. Because most of the bitcoin users wants to double or triple their bitcoins by invest their bitcoins in reliable investment platform. So it’s the right time to start bitcoin investment business platform to get more investors traffic.

Today HYIP and MLM based bitcoin investment business is top most profit making business. It helps to yield high profit in short turn over period. With the help of MLM concept you can more referrals and your investors can get referral commission through your investment platform.

Build your Bitcoin investment business website with right solution !

Terrence Yang

Terrence YangxWall Street VP, directeur, avocat principal. xMD @ $ 1B + AUM.

Répondu il y a 80w · L'auteur dispose de réponses 2.1k et de vues de réponses 6.7m

Hard to say for sure if below is correct but here goes:

Advantage of investing in Bitcoin startups instead comprendre:

  • Less Tied to Bitcoin. A Bitcoin startup with pragmatic management can easily switch from Bitcoin to Ethereum or other blockchain if that is more effective.
    • Many Bitcoin startup founders are true believers who believe in Bitcoin and will not switch to something they perceive to be more centralized, less anonymous, etc.
  • Application Focused. Even if Bitcoin the digital currency somehow loses value, Bitcoin the blockchain could remain very useful. If a Bitcoin startup can be successful at the application layer, then the fact that Bitcoin is worth less may not matter.
  • Higher Upside. Hard to do but if you get in the best Bitcoin startups, then your returns should be higher.

On the other hand, the advantage of investing in Bitcoin directly instead of Bitcoin startups include:

  • Liquidité. You can sell your bitcoin 24/7, including just parts of it.
  • Less Agency Risk. Bitcoin startups have an additional layer of risk compared to Bitcoin itself. Bitcoin startups rely on the startup practicing good management. Both Bitcoin and, to a lesser extent, Bitcoin startups face the risk of bad or incompetent actors at the Bitcoin layer.
  • Avoid Adverse Selection. Unless you’re getting into the best Bitcoin startups, you may be better off investing in Bitcoin directly.
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Gillis Danielsen

Gillis Danielsen, physicists in finance, fan of facts and trivia

Répondu il y a 246w · L'auteur dispose de réponses 207 et de vues de réponses 1.1m

It is a well known and often quoted experience from the 19:th century's big gold rushes that selling shovels (and services) to prospectors made more people wealthy than very risky gold-digging itself.

Adam Gering

Adam Gering, Cypherpunks écrivent du code.

Répondu il y a 246w · L'auteur dispose de réponses 1.7k et de vues de réponses 2.1m

The value of bitcoin is not a proxy for the value of bitcoin startups, nor vice versus.

Nordstrom made a lot of money during the Alaskan Gold rush (selling picks and shovels), but the gold rush caused the market price of gold to go down.

Bitcoin companies stand to make a lot of money that is not necessarily correlated to the price of bitcoin.

Mining hardware companies stand to make more money with a high and increasing price of bitcoin, yet their success will drive down the price of bitcoin. Bitcoin payment processing companies stand to make more money with a stable bitcoin price.

Bitcoin startup companies can survive the total destruction of bitcoin (Nordstrom now sells very expensive clothes); where as your bitcoins will not.

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