Posts Tagged ‘Bitcoin’
Bold predictions for the next 10 years
Chris Schroeder, author of the book “Startup Rising: The Entrepreneurial Revolution Remaking the Middle East”, asked me the following question at the Abraaj Forum in Istanbul a few weeks ago:
“What are some bold predictions this audience needs to hear? What will happen in the next 10 years”.
The audience included heads of state (Mexico, Turkey, and other Presidents/Prime Ministers) and highly influential wealthy business leaders (founder of Aramex, chairman of Airtel Nigeria, etc). What could I possibly say that would cause them to look up from their cell phones?
I decided to make some provocative predictions based on many companies that I have met around the world. Bold, and slightly crazy, so they would at least listen. The following 5 predictions are the ones I made, and I strongly believe at least 3 will happen…although I don’t know which three!
Within 10 years…
1) Driverless cars will be on the road and owned by consumers…and within 15 years, you will be able to press a button on your mobile phone to call one to pick you up. That app could be Uber or a whole new system. Within 20 years, driverless cars will make up 25% of the cars on the road.
2) A 3D printed organ will be transplanted into a human being. Likely a liver or skin.
3) Bitcoin will become the official currency of certain countries with high volatility. Already, in Argentina, companies like Bitpagos are allowing merchants to accept pesos and cash out in bitcoin because some would rather hold BTC due to inflation.
4) A tragedy like the disappearance of MH370 will never happen—because we will have drones in the sky that will be able to take a picture of nearly any spot on earth within seconds of receiving a command, likely administered through a mobile phone, and not subject to orbital revisit time, unlike our satellites. Regulations are already changing in this space to open up the use of drones commercially.
5) Part of our food supply will come from genetically modified micro-organisms that secrete, as a waste product, various types of amino acids and proteins. Companies are already doing this at a lab scale and by 2025, this will be at a commercial scale.
Let’s see what happens. Hopefully I’m not 0/5.
Bitcoins at $1,000/each? That’s a steal.
Bitcoins are to money what email is to communication.
Today, there are about 12,000,000 bitcoins—the unit of currency for the open source peer-to-peer electronic money and payment network created in 2008—in circulation. At $1,000/bitcoin on Coinbase or BitMe, that represents about $12 billion in value. Though tremendous at first glance, as a point of comparison, the total value of all gold reserves in the world is about $7 trillion. Bitcoins therefore really amount to but 0.2 percent of the value of gold, historically the world’s primary store of value.
In other words, all bitcoins in circulation today are worth less than 1/6 of Bill Gates’s total net worth of $76 billion. Through either comparison, they could be priced way too cheap.
The best way to think about bitcoin, as my friend Charlie Songhurst describes, is to ignore the urge to conceptualize bitcoin as a “currency replacement” or “money.” It really is the next generation of currency used within a digital ledger. Within this ledger, or virtual sandbox, the store of value is bitcoin; outside of this sandbox, the store of value can be converted back to whatever you want: USD, Euros, RMB, maybe even gold. But, within the theoretically seamless, borderless sandbox, there will be a huge reduction of transaction friction, especially across country lines: lower transaction fees– and subsequent enablement of micropayments, lower currency exchange fees, faster transaction times, and even greater trust in the bitcoin unit (particularly for developing markets, where there may be hyperinflation in Zimbabwe or an artificial currency peg in China). On top of this, bitcoins are a deflationary currency: as the demand rises, the price should rise, as there will only ever be a fixed amount in circulation (21,000,000 after all the bitcoin mining).
Why Bitcoins aren’t Tulips
The graphs of the meteoric rise in bitcoin price look eerily similar to the 1600’s Dutch tulip bubble…just without the crash (at least, so far). However, I posit that bitcoins differ from tulips for two very simple reasons:
- Tulips’ primary function is to look pretty.
- Bitcoins have hundreds of functions, from online gambling, money laundering, and other illicit activities to seamless cross-border transactions, international micropayments, and more. Even Shopify’s 75,000 merchants can now accept bitcoin payments, bitcoin ATMs are sprouting, and trips aboard the Virgin Galactic are being booked using bitcoin.
In a bull case, bitcoin could be the way we transact in the near future. In the base case, it is a hedge against inflation, quantitative easing, and rogue monetary policy. If you only believe the latter, and the total value of bitcoin could represent only 1 percent of gold, then that itself is worth north of $5,000/bitcoin (>$7,000 according to the table below from the Bitcoin Investment Trust, which was based on a higher gold to dollar exchange rate). If you believe it has a chance at the former, the sky is the limit.
So, is bitcoin a steal at $1,000/piece? Very possible.
UPDATE (12/1/13): Ever since I published the article, people have asked me whether they should buy BTC. My advice: don’t invest any more than you can afford to lose. There is a significant probability (i.e. the bear case) that bitcoin will unravel as a ponzi scheme and be worth zero. Here is a great article on that. I personally think it will be worth either zero or thousands of dollars more than it is today. On that risk/reward basis, it may make sense to put 1% or less of your net worth in it, but no more.
Disclaimer: I own some, but not nearly enough, bitcoin.
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