Bitcoin: the Company? or the Currency?
Charlie wrote a great post about Bitcoin recently. It’s a great read. There is one key point that’s banging around my head that I can’t get out since reading his post yesterday:
If you believe in the Bitcoin ecosystem with enough conviction to make an investment right now, are you better off investing in a startup making a business in the space or simply taking your capital and buying the currency itself?
Given the deflationary nature of the currency, can any single company build value faster than the current itself will appreciate if the whole system takes off?
The value of a Bitcoin has grown 900% in 3 months. Really remarkable. How high will it go?
It’s interesting to see the correlation between Bitcoin price relative to its Google Trends search volume interest over time. (depicted above)
What is a Bitcoin worth? The simple answer is “whatever someone will pay for it.” Which, right now, is over $90. But that answer doesn’t properly value the usefulness of a Bitcoin. I find the user experience of Bitcoin to be incredibly frustrating today, and I’m surprised the difficulty of using/transferring/storing Bitcoins is not hindering its value right now.
Because the value of a Bitcoin is rising so rapidly right now, there is a strong disincentive to spend them. It’s in either a bubble or a deflationary spiral. Until this period of rapid price growth stabilizes I don’t feel like I really know what a Bitcoin is worth.
Here’s a simple heuristic: I think we’ll know what a Bitcoin is really worth when the current price, 30-day moving average, and 90-day moving average are all within 5% of each other. Until then… who knows?
Bitcoin Needs a Leader
Bitcoin is quite a remarkable, audacious project. I’m rooting for Bitcoin and all the startups building in that ecosystem. But I can’t help but wonder if the Bitcoin movement would be better served if it had a clear, well-known creator. Every non-commercial movement needs a cheerleading parent:
Wikipedia has Jimmy Wales…
The world wide web has Tim Berners-Lee…
Linux (and also Git) has Linus Torvalds…
These charismatic creators can get up on stage and really motivate people to jump into the parade they are leading. It’s an amazing sight to watch (I’ve had the wonderful pleasure of seeing Jimmy speak, and it’s incredibly motivating).
Bitcoin, like any major project, does have a creator, but that creator(s) chose to hide behind a pseudonym: Satoshi Nakamoto. The myth of Satoshi and his true identity certainly adds to the mystique of Bitcoin. It also generated some nice PR with two investigative journalism efforts to unearthing his/her identity via the New Yorker (warning: paywall on that NYer link :/ ) and Fast Company.
But, I don’t think a couple of news articles makes up for the loss of a charismatic creator. No one can tell the story of a movement like a Founder can. I hope that a thought leader emerges in the Bitcoin movement that can fill in the gaping hole left by Satoshi Nakamoto’s absence.
