Quick Thoughts on the Bitcoin Adoption Curve and Plans

I’ve decided to buy Bitcoins directly and over the last week at Coinbase. I have started to accumulate a position which I intend to make the size of a normal Angel investment.  Many of which can go to zero, just as Bitcoin could.  Though the risk/reward is probably even better here — an angel investment is more likely to wipe out than a currency — perhaps I have been reluctant not wanting to feel foolish with money.  I’m ahead on the position, having started buying almost daily at $110, but not in a meaningful scale; the price is now $140.  Right now you can only buy 10 coins a day so I don’t have the full position on and the movement is starting. One might say there is a classical chartist “breakout” over a base of support, etc. etc.  (I am hoping for a regression to the low 130s and stay there for a while.)

The investment thesis remains: increasing interest in a limited supply good that is having a network effect (who is gobbling up LiteCoin now?  What is happening with Ripple?), and actually has transactional value.  I think there could be exogenous drivers that could spike the price (Cypriot bank seizures having been the first bubble driver) that could include other countries’ defaults or currency depreciation.

The New Yorker had a piece wondering whether Silk Road’s seizure would be helpful to Bitcoin adoption.

Marc Andreessen tipped the hand of still another VC going to join the bitcoin fray at Pando Monthly.

“We would love to make a bigger bet faster,” Andreessen says. “Like the Internet, Bitcoin is one of those things where it’s probably going to be hard — it’s either going to work or it’s not, but if it works it’s going to work at such scale it will be hard to make a venture investment too late.” For Bitcoin to become a big success, it will have to handle a lot of trading volume in the world. If you take the global flow of goods, services, and money and you run the numbers — it’s astronomical. Even if Bitcoin only represents one percent of that market, it’s trillions of dollars.

Coinbase raised $6 million and has made the transactions a lot more user friendly.  Union Square Ventures, IDG Ventures, SV Angel are all behind the company which again is not proof of its ultimate success but that liquidity is coming to the market.  Once the illiquidity discount to any currency is removed the value will increase.

Perhaps most promisingly, a survey of both my employees and friends — most of whom are very early tech adopters — all raised eyebrows at best and expressed contempt at worse for the notion of math-based currency.  The most financially savvy of whom pointed to previous failed electronic currency efforts but did not seem aware of the greater market penetration of Bitcoin now.

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