We’re just about a week into 2015 and investor Marc Andreessen just “tweetstormed” his thoughts surrounding Bitcoin as we move further into the year. If you need some perspective, check out State of Bitcoin 2015: Ecosystem Grows Despite Price Decline from Coindesk before reading the storm below:
Looking through his tweets, a couple of the big ideas are worth expanding on:
- Sub $300 price as of January 2015: Anyone who still thinks Bitcoin is a good speculative investment is in for a world of hurt but that’s probably a good thing. As speculators and early adopters leave the market we’ll see less flash crashes like the infamous BearWhale
- Continuing volatility: I think Marc is understating the impact volatility has on Bitcoin adoption. Businesses may have the opportunity to convert BTC to fiat almost immediately but consumers that are holding bitcoin in wallets are still getting hit hard by the high volatility. This is especially problematic on sites like Coinbase where “buy” transactions take several days to settle and the price is locked in when the transaction starts, potentially short changing the user.
- Limited use cases: Marc’s analogy is a bit lacking. I think a more powerful one is when the first iPhone came out did anyone imagine we’d be hailing cabs, paying for groceries, and tracking our fitness all from what was at the time a glorified palm pilot (that was harsh). Ultimately, it’s hard to predict how new technology will evolve, especially when its helping to create completely new markets.
In addition to Marc’s thoughts, here’s a couple of other themes to consider going into 2015:
- Blockchain sans financial Bitcoin: Leveraging the “blockchain” without using Bitcoin as a financial instrument received a lot of mindshare in the latter half of 2014. Unfortunately, as it’s been pointed out by others the “tokens” on the network need to have some value in order to incentivize miners to secure transactions. Stepping back though, I think it’s worth discussing what a “paid” or community supported blockchain looks like. You already trust and pay Amazon to run your servers, why not to run your blockchain infrastructure?
- Security and Bitstamp: The big news this week was that Bitstamp lost $5 million worth of Bitcoin out of their hot wallet. Big companies have lost everything from photos and emails to USB sticks full of social security numbers so it shouldn’t really be a surprise that someone could steal bitcoin as well. Although it makes great clickbait, all this demonstrates is that computer security is really hard.
- Legislation: Since December of 2014 the community has been anxiously waiting the revisions to New York’s Bitlicense proposal. Given how important New York is as a financial hub, it’s probably a good bet that other jurisdictions will follow with similar legislation once Bitlicense is announced. Because of this, legislation is the single greatest existential threat to bitcoin.
2014 was definitely an exciting year for bitcoin and looking forward 2015 might be a “make or break” year for adoption, startups, and the future of cryptocurrency.