Bitcoin - Price and Promise

I’ve written a lot about Bitcoin. I’m a believer as I think it will be the transactional plumbing of the Internet and mobile and lots more in due course.

But the story right now is the sagging price of Bitcoin.

In full disclosure I’ve started buying it again after staying mostly on the sidelines for most of the past two years.

I have never owned much Bitcoin. I give away or spend what I buy. I am not a hoarder of Bitcoin. I don’t care about that aspect of Bitcoin, although many (most?) do. I care about it as programmable money.

But, of course, Bitcoin’s price is a function of its promise. Why own Bitcoin if it has no future?

So does a sagging price mean sagging promise?

In the long run, absolutely.

In the short run, not so much.

The market price of an asset in the short term is driven by emotion (greed vs fear), liquidity, technical factors, and a bunch of other things. Right now, those factors are driving down the price of Bitcoin. Last year they drove it up.

I continue to believe that the thing to watch is not the price chart, the volume chart, or any chart. The thing to look at is Github, Hackathons, Accelerators, and everywhere else that entrepreneurs and developers showcase their work. That’s where the future of Bitcoin and its promise will be determined. And right now, based on what I’m seeing, it’s future is very bright.

For another take on this same question, William Mougayar has a post up today on the same topic.

#hacking finance

Comments (Archived):

  1. andyswan

    I still haven’t seen a really compelling reason why Bitcoin is better than normal digital $$. I get how it works I just don’t understand why it is better than Venmo/dwolla/Amex etc

    1. William Mougayar

      There is more to it than just transfering money, although it’s really easier, faster and cheaper to do so once you own Bitcoin. It’s a bit like Paypal without the fees or attitude.

      1. JimHirshfield

        “… without the fees or attitude.” hahahaha! Good one.

      2. Richard

        What’s the motivation for adding mining and miners to the algorithm?

        1. leapy

          Someone has to maintain the infrastructure – this is the reward for doing so…..

      3. RichardF

        paypal without the attitude is a BIG selling point! I hate paypal

    2. fredwilson

      Its programmable and open and not controlled by anyoneThose don’t seem like much but I believe they are everything in the long run Think AOL and Compuserve vs the webAOL and CompuServe were better easier and more popular until they weren’t

      1. andyswan

        I hear you…the libertarian in me is certainly intrigued

      2. LE

        “Its programmable and open and not controlled by anyone”Well you know that “most people” don’t care about that or for that matter even know exactly what that means. [1]I mean when you go and travel somewhere think about whatis on your mind as far as picking a hotel or place to eat. It’s veryclearly defined in your head. Food, ambiance and price. It’s nothow they treat their workings or how green the HVAC system is.Likewise when you choose a plane flight it’s price and schedule. Youdon’t care if it’s all controlled by one airline or 6 airlines you justwant to get to where you are going.[1] Most people care about the control thing either. People smoke cigarettes because they are addictive. They don’t really care if Philip Morris is in charge or not. Or illegal drugs.

        1. http://BTC.Blue

          Maybe bitcoin isn’t for such short-sighted people right now. Try again in a few years.

        2. Andrew Stone

          You are right most people don’t care about programmable, open, decentralized. They just use gmail, facebook, twitter, Amazon, news sites etc. Now I’ll let you think about why those services exist on the web and not on AOL/Compuserve.

      3. Vasia Pupkin

        Ok, but why can’t we build a programmable and open replacement to Visa/MC? Why do we need another currency with exchange rate volatility?

        1. Yoghi

          Building something on top of a house of cards doesn’t work for very long.

        2. nik5ter

          Is it a ‘ledger’ creating a ‘coin’?Or a coin creating a ledger? (Coin ‘reward’ aka creation, is the incentive to the miners to maintain/validate transactions in the public ledger — a ledger which then has potential use case beyond ‘coins’)?One cannot exist without the other. Bitcoin is proving that a public/open ledger can work, and it works because it has internal incentives – the currency itself. Circular.Would love to see a ‘magic/god ledger’ with no such incentives. Interesting read:

    3. pointsnfigures

      Don’t look at the end result. Venmo is just a peer to peer payment system. Look at the block chain. That’s where the action is. Suppose you make bourbon and I grow corn. We can make a P2P agreement without using any distribution on the block chain and it’s guaranteed to go through.

      1. andyswan

        But the corn isn’t guaranteed to go through…that’s the problem IMO. There is a significant downside to the fact that BTC transactions are non-repudiable, IMO. I’m not sure people realize how much of “transaction fees” are tied to repudiation risk/features…which definitely have value for the consumer.

        1. pointsnfigures

          But, the corn will go through if the weather cooperates. Suppose we transact and there is a drought. As the farmer, I have a contract with you. I can scrounge for other sources of corn-although it will cost me. There are reputation costs that might be high for busting contracts on the block chain as well. Because it costs me less as a farmer to transact on it-I have every incentive to make good on transactions I make.

          1. andyswan

            How is bitcoin cheaper for you than me paying you with a cashier’s check?

          2. pointsnfigures

            Probably too simple a deal-but you have to pay fees to a bank. No fees in this transaction. Think about a Swap between two banks.

          3. James Rubino

            Blockchain technologies have faster verification of a non fraudulent transaction. Cashiers checks that I have ever encountered come with a max and mins. Cashiers checks do not cross political borders well especially during political churn in the same light standard treasury money and accounts are tough to secure for the giver and receiver in transit to and from the exchange.

          4. Dogecoin

            You pay a $10 fee for a cashiers check. $1 for a money order. Bitcoin? About 3-4 cents for a transaction.

          5. JLM

            .There would be nothing wrong with funding this transaction with a conditional letter of credit wherein the buyer would have evidenced his good funds prior to the corn growing and the seller would get his funds upon delivery and inspection.The intermediary would hold, inspect and fund the deal.JLM.

          6. pointsnfigures

            How much will they charge?

          7. JLM

            .In the old days this would be an accommodation if the bank had the authority to make the final decision on funding and you had a business relationship and deposits with the bank.Otherwise, 1%.JLM.

          8. pointsnfigures

            Your comment brings about why I became a believer in Bitcoin (other than the Milton Friedman video talking about virtual currency) First, why should the bank have the final authority? Block chain changes that. (Further, imagine an app where people could crowdsource financing and earn interest on their cash-because they don’t have the fixed costs of a bank, they can do it cheaper) Second, what if I have zero business relationships? Block chain guarantees that I am viable. Third 1%. What if the transaction is a a 100,000 bushel transaction at a cost of $4 per bushel? 1% can be avoided using Bitcoin.I would agree that right now the financial system has different built in systems that make it “safer” to transact in fiat currency rather than Bitcoin. But as @wmoug:disqus wrote today, the systems that will make Bitcoin work are still in the oven.

        2. James Rubino

          Non-repudible… yet.Making the accounts transparent before contractual exchange is very possible within the quickly adapting US legal system just not a standard contract yet.The Bitcoin protocol devs and some “altcoins” (too few to mention but enough) are quickly innovating and speculating on the programmable enforcement of contracts to the basic bitcoin blockchain layer….Regardless repudiation can be created with traditional legal systems at some layer of the crypto systems economy and will if Bitcoin even comes close to succeeding as a financial artery in the global exchange of value.

        3. Adocracy

          you can initiate a BTC-for-goods exchange as a three-party mediated transaction, where the two principals have a dual signature requirement to release the BTC from the “escrow” and a third “person” can act as arbiter in case of disputes over deliverability/quality/etc. Credit card companies have offered this service almost as a loss leader – even if both sides demand their goods back in a CC transaction and the credit card company has to eat the price of the lost item, that cost is just borne by their customer pool as a forced insurance (and higher interest rates). This is the equivalent of a financial “jury” trial. Now replace that system with the three-party escrow contracts for BTC and you have financial “arbitration” – faster, cheaper, less judicial overhead, same certainty of an outcome but also more transparent. Overall, a contractual system (BTC) that can be trusted is better than an oligopoly (CC companies) that is opaque (and heavily marketed to un/less-knowledgeable customers). One can draw these kinds of comparisons in multiple arenas with BTC versus currency-backed digital transfers. Although I disagree slightly with @fredwilson – I’m strongly bullish on the currency aspects of Bitcoin too (not the speculation, but the fiat medium), in addition to the programmatic features.

        4. Dogecoin

          Research multi-signature transactions. Or Blockchain triggers. Removes the middlemen on 99% of transactions where the common person is ripped off constantly. Read up on Counterparty. All good stuff.

    4. Beautyon

      The supply is limited by a programme. If you understand what money is and how it works, you will understand why this is so important. “Normal” digital “$$” are nothing more than tokens in a database representing government currency that is of an unlimited supply. This means savers have their spending power stolen from them. The dollar is unreliable, turgid, dishonest money.Bitcoin on the other hand, is completely honest, open, flexible, liquid and not under the control of any man. Its supply is always known and fixed, and can never be changed. This means you can rely upon its supply, and be assured that your spending power is not stolen from you in secret. Of course, in its early days, Bitcoin’s price is fluctuating. This is because it is new and not widely circulated. Once this happens (and it will happen) the price fluctuations will be tiny, and not even worth reporting.Bitcoin is better than dwolla because you do not need permission from anyone to use it. The same with Amex or any credit card, all of which require the permission of someone before you can spend your own money. Also, the fees are microscopic.Bitcoin is better than Amex like fax machines are better than the telegraph. Its blatantly obvious to anyone who has used it, and really, there is no excuse not to try it, since the tools you need (Blockchain) are free and turn on instantly.

    5. gubatron

      for one, it’s safer. Your identity is not tied to it, therefore next time you see millions of accounts on a centralized bank like Chase getting hacked, you won’t fear about having your identity stolen and putting things like your credit score at can be used for microtipping and for sending any amount of value at the same time, for the same cost, pennies per transaction. I can send you $0.25 or $150,000,000 and pay the same transaction fee, and I don’t have to fill out a lot of forms at a bank that shouldn’t have to put its nose in my business if I decide to withdraw $10,000+ from my account. Look at this to see what I mean (this was my aha! moment)…on the banking services aspect of it, No bank organization or conglomerate will ever be able to compete with Bitcoin once it reaches a tipping point. To provide powerful banking, the kind that allows you to store money, send money, trade assets, ask for credit, to about 6 billion people who are currently unbanked, or have very limited banking services (just a shitty checking account with ridiculous monthly fees, no transfer capabilities…) banks have to build branches, hire people, deal with governement regulations… with bitcoin, if you could tell the whole world about it today, all they’d need would be an internet enabled computing device (a phone perhaps) and a Bitcoin wallet app. How the hell do you compete against that?when you pay with your Amex, money gets pulled out from you, all they need to have is your authentication, but there’s really no authorization from you in the process (remember the Chase breaking, and how you will have to change your credit card in all services everytime they get hacked, because they need to re-issue millions of credit cards when that happens), with Bitcoin payments need to be authorized by you, payments are literally signed by you (using cryptography)”normal digital $$” can be counterfeited, not bitcoin.Bitcoin is way more than money, try to put some of your time into it, don’t miss the boat.In a simple sentence, You’re comparing the fax machine to the internet back in 1999. The Bitcoin community is already way beyond money, we’re already doing p2p marketplaces, and stateless stock markets, and smart contracts (exciting time for law students), and p2p crowdlending, we’re decentralizing everything.

    6. Dogecoin

      They may not care immediately. Most don’t also care that their personal information is stolen/hacked over and over. They do care when their identity is stolen and life is ruined for months on end. Also travel the world and exchange currency a few times, and the joke is on the traveler. Use a CC in a foreign country and you get a piss poor exchange rate. BTC solves all this.

  2. JackCLiu

    Great post. I like your metrics. I hope everyone can be as patient as you are Fred to see this through.

    1. William Mougayar

      Well, if we stop talking about price, and more about capabilities, good things will happen, and the price will take care of itself.

      1. ParsnipCommand

        Yes! This! There are people in the world who get it! πŸ™‚

  3. Ed Freyfogle

    Hi Fred,I agree with your hypothesis that the hackers are the one to watch. Can you point specifically to some of the hacks, experiments, unexpected use cases, etc that give you faith?These days I’m on the keyboard less, but I still consider myself a developer, I live in London one of the major tech/finance hubs, there is a vibrant fintech scene, I go to plenty of dev events, I hang out with hackers, I have a team of 7-8 developers in my office, etc, and I know lots of people who bought BTC to speculate (mysef included, it worked out great!).So I don’t think my eyes are closed, but I don’t see the technical experimentation. Where’s the guy who shows up at the pub and says “hey everyone check out this bitcoin thing I made for laughs”? Where are the “toys” that become something bigger?

    1. Twain Twain

      London is about 15-18 months behind in the types of technical experimentations that happen in NY and SV. I’ve been to hackathons in all 3 cities, winning prizes at 3 in SV (including AngelHack SV) and judging at Droidcon in London (Europe’s largest Android developer conference).A lot of developers I met in SV were ideating around Bitcoin as are a number of established startups.

      1. Ed Freyfogle

        Can’t comment on Android dev, but definitely not the case in other categories. But let’s assume you’re right – where are the US-based BTC experiments?

          1. Ed Freyfogle

            But this still seems very top down. University creates BTC course, VCs push BTC. Where’s the bottom up, guy in the garage building something cool? Not trying to be antagonistic, serious question.

          2. Twain Twain

            Serious answer: get on a plane to SV. Go down to Palo Alto and meet with developers.Look deeper into some of the startups mentioned in Zapchain. Go see what they’re working on.In NY, I met ex-Wall St bankers in their mid-late 20s who’d moved out to SV and were in NY to recruit people who could sell their BTC technologies back into the banks.

          3. JimHirshfield

            As Fred mentions in the post, check out GitHub where developers store their code base. I’m no developer, but Fred’s saying search GitHub and ye shall find.

          4. Ed Freyfogle

            very familiar with github, I see code for mining bitcoin, for rbitraging between different exchanges, etc. I’m not interested in commit messages like “optimized function Y to be 3% faster”.My question is where’s the “I made this little hacky thing that does X using BTC” type blog posts, where X is something that a normal person might say “oh, neat”.

          5. JimHirshfield

            I dunno

          6. kidmercury

            here’s something you might find interesting:…one area where BTC might play out usefully is in sharing computational costs associated with processing and storing large data sets.the exchange rate issue is still a huge factor that is not fully appreciated. eventually a player will look to contain exchange rate volatility because that is what is truly needed to make all these dreams into a commercially viable, user-friendly product. everything is very rough and imprecise until that kicks in. just like no one takes bitcoin seriously as money because it is too volatile, the same logic applies for using btc as a crowdsourcing or attribution measurement technology. it’s just too imprecise, so you can use it in scenarios where gross imprecision is tolerable (i.e. fun stuff, games, or charity).

          7. fredwilson

            That is exactly what I am talking about when I say “native use cases”Thanks Kid. Appreciate it.

          8. leapy

            My 12 year old son did a little reading about the blockchain and mentioned that it would be a terrific resource for future historians if all transactions, life cycle events (births, deaths) and digital assets such as news events (major and family-level), environmental data….. were captured within.His hope is that families and nations could record their lives in a secure, distributed infrastructure without worrying about how it might be found generations down the line.I am not totally sure this is possible on the blockchain but it sounds reasonable to me. Can anyone advise?

          9. Richard

            The bitcoin community needs to pick a lane, currency vs commodity. And it should be currency. Telling people now is the time to buy Bitocoin etc., is keeps risk averse people (the majority) on the sidelines. Hack out volatility from bitcoin and bitcoin has a future.

          10. Ed Freyfogle

            Will be sure to use that next time I”m crunching DNA data with my friends. Until then, any use cases for a normal person?

          11. kidmercury

            i think the most practical use case for the common person is to illegally evade capital controls. let’s say you are a US person who wants to gamble online, an activity that is largely illegal in the states. how can you open a sports gambling account with an offshore broker without raising any red flags? enter bitcoin….the tech community likes to distance itself from the illegal use cases, though those use cases are the ones that most clearly fit into the disruptive theory framework, as they illustrate an inferior product (bitcoin) being embraced by a customer base that has no other options — and creates a new market in the process.

          12. Ed Freyfogle

            I get what you’re saying, but also seems to me tons of Americans were doing online gambling before bitcoin. Unless there’s been some major crackdown I’m unaware of that’s made it harder, difficult for me to see this as the entry point to mass adoption.

          13. kidmercury

            definitely not an entry point for mass adoption — but an entry point for some. there is a whole lot of iterating that needs to be done before it gets to mass adoption. the tech people that think this thing is on the brink of mainstream adoption with tons of use cases on the verge of being released are being silly. when it gets to the mainstream it’s going to look a lot more like paypal, spotify, amazon web services, dropbox, etc than it currently does. i wonder if the end user will even notice much of a difference, aside from the fact that it’s cheaper comes with some rules that are enforced in a very computerized way.

    2. William Mougayar

      There is lots of experimentation and work happening in the Bitcoin space. I see 3-4 new companies / ideas per week.

      1. JimHirshfield

        Are you a VC?

        1. William Mougayar

          Getting there….via angel investing, mentoring & advising startups…and cozying-up to real VCs.

          1. JimHirshfield

            Wow. Great news.

    3. fredwilson

      Look at the accelerators in silicon valley and you will see a ton of stuff Also look for projects on github that reference the Coinbase, Blockchain, Coin or other similar APIs

    4. William Mougayar

      Also, on AL alone 527 Bitcoin companies do read Coindesk and Bitcoin Magazine daily.

  4. Tom Labus

    Why does an auto worker in heartland USA care about this?

    1. jason wright

      do they care about the price of a barrel of oil?

      1. Tom Labus

        some, I would imagine

    2. JimHirshfield

      “auto worker in heartland USA” <—target market? Perhaps not just yet. This stuff is still in it’s nascent stage. So the target market now are people who read this blog. Any auto workers down here in the comments? If so, please reply.

      1. Tom Labus

        were talking benefits to using a technology?

        1. JimHirshfield

          Right. So, I’m agreeing with your subtext that Joe AutoMaker doesn’t care (right now).

      2. LE

        “it’s nascent stage”But when will bitcoin be in the nubile stage or be used for dowrys?

        1. JimHirshfield

          Dowries? What makes you think it hasn’t already?

      3. pointsnfigures

        Auto workers in the heartland will feel the effects of Bitcoin when goods and services get cheaper because of it.

    3. fredwilson

      They don’t. They didn’t care about the web in ’93 eitherBut Marc Andreesen did

    4. Dogecoin

      He cares when his good ‘ol american currency is devalued to a point where his milk and eggs cost more and more.

  5. Twain Twain

    It’s hard to change how people have transacted for millennia: via cash currencies and face-to-face before the 1990s technology automation happened in finance which made credit/ debit cards and online payment processing widely available.Plus, of course, the incumbents (the financial institutions) have been able to amass relationships (with merchants, with customers etc) power and influence over the supplies and transactions in cash currencies for hundreds of years.In a way it’s a “earth is flat” dogma that Bitcoin has to find a way of breaking through.It’s the same hard road ahead for other innovations — especially ones involving mathematical technologies.

  6. LIAD

    price is decliningtransaction volume is flatpress narrative remains drugs and pornmain street sentiment is negativekiller use case still elusivefoundation is in disarrayevangelists have been indictedearly adopters onto new’s easy to make a cause that bitcoin is moribund.the counter argument that smart makers are still making and are only just getting warmed up – is strong.i agree with William that low price is a good thing, it takes the pressure off and gives everyone time to create and experiment with less oversight and fanfare.however, if we’re still in same position in 18-24 months. shit be bad.#BULL

    1. Ed Freyfogle

      Not just that, but more and more fintech start-ups innovating on the existing well known monetary/payments system. As that gets easier / cheaper / faster, why does a consumer need an alternative?

      1. LIAD

        bitcoin offers a completely different axis of value over and above price/speed, and one which existing providers can’t even approach – namely decentralisation. time will tell whether or not that’s an important distinction

        1. Ed Freyfogle

          I get it, but when it comes to money for most people new = scary. If some long established, well trusted institution isn’t behind (ie Bank of England or similar), the default reaction for most people is “umm, thanks, but no thanks”. Look at al the fear around the currency topic in Scotland referendum. I’m not sure the idea that “no one’s in charge” appeals to the broad masses.

          1. LIAD

            i hear you.i don’t like to see it as: no one is in charge.i like to see it as: everyone is in charge.

          2. fredwilson


        2. fredwilson

          More truth

      2. ShanaC

        because the existing system is still kind of expensive to work off of

    2. William Mougayar

      Exactly. The entry point will be more affordable to more people. Then, hopefully more usage will ensue. There aren’t enough users with usage intent yet.

      1. Twain Twain

        Fred should also read this about Google and Bitcoin:*…That’s potential usage intent right there.

        1. fredwilson


      2. JamesHRH

        I am not agin ya Will, but it is hard not to think ‘rationalizing’ when you say ‘entry point will be more affordable to more people’. πŸ™‚

    3. JamesHRH

      What would a technical chart analyst say about it?As an aside, that;s a very tight Coinbase UX.

      1. AKWAnalytics

        I am a TA. Charts are saying the bottom is near (if not in). Short term bullish up to at least ~400 $. Medium term neutral to bearish as 275 $ should be tested. Long term bullish as the current EW consolidation plays out through the end of the year leading to a powerful rally into early – mid 2015. Still in institutional accumulation mode (OTE long zone) at these prices though, imo.My 2 satoshis

    4. fredwilson


    5. Underwun

      I would ask that these be added to your list.valid alternativesI believe valid efficient alternatives are proven and the blind adherence to Satoshi is now being questioned, personally I’ve come to believe with a passion that PoW is flawed.need to spendIn addition and this relates to transaction volume, there is no ‘need to spend’ only those cashing in or wishing to make a point, spend Bitcoin.transaction speedsFor digital money to catch on it must mimic cash for the unbanked, counter sales are fundamental to creating demand in emerging markets, otherwise it’s not a currency but an inefficient transaction validation medium.transaction costsSo much is made of how low transaction costs are but that’s like saying the iPhone 6 is cheap because of operator subsidies.Unlike Fred for the first time in two years I’m selling. I believe in the concept but I see that Bitcoin has fatal flaws that cannot be overcome with momentum and a belief they’ll be fixed in the course of time.

    6. Underwun

      I’d like to add to your list:valid alternativesthe Satoshi model has been questioned and shaken beliefneed to spendrelated to flat transaction volumes, you only spend if your making a point or your cashing out, otherwise it makes no sense to unloadtransaction costssuggesting they are cheap it’s like saying an iPhone is cheap because of operator subsidiestransaction speedsdigital money must mimic cash in order for the unbanked to create demand with counter sales, if demand isn’t created in emerging markets then it’s nothing more than an inefficient validation mechanism.Unlike Fred, for the first time in two years I’m selling.

  7. jason had 85% of the US population signed up before it even launched. And its ACH not a card network. So its free to merchants and recipients. Its also ACH “push” so basically zero fraud. This is just one example of better platforms (albeit a really good one). I understand the “programmable money” concept, but that only matters if there are use cases people care about. And all the advantages of bitcoin for end users are not unique to bitcoin.

  8. jason wright

    3rd June $666, 7th October $330. one year ago $123.

  9. William Mougayar

    It’s so tough to predict what the bottom is. Maybe it’s $100 as I alluded in my post.The thing I wish for is that when the price rises again, it does so in lockstep with more users getting into Bitcoin, and more real usage coming out of it. The gap between price and usage + capabilities hurt us.

  10. jason wright

    and there were such high expectations for Litecoin only 18 months ago. it now seems dead.

    1. JimHirshfield

      never heard of it

      1. jason wright


    2. fredwilson

      I always thought the alt coins were the wrong ideaI think it makes sense to innovate on the blockchain were all the liquidity and mining is

      1. jason wright

        it did seem like a Satoshi Nakametoo phenomenon, with questionable claims of superior characteristics as the raison d’etre.

      2. JimHirshfield

        I’m curious, do all those alt coins operate on top of the Bitcoin blockchain? Or were they trying to reinvent the blockchain as well?

        1. fredwilson

          Most create their own blockchains which is the problem. There is little mining and less liquidity on them

          1. JimHirshfield

            Got it. Thx. So, no momentum breeds no momentum for alt coin. It’s all happening at bitcoin/blockchain, I guess.

      3. pointsnfigures

        But, if the top seven retailers were to get together and create their own things might get interesting. Could be a way to get competitive advantage.

  11. JimHirshfield

    “I have never owned much Bitcoin. I give away or spend what I buy. “CanI’vesome? :-O

    1. fredwilson

      Sure. Sending now

      1. JimHirshfield

        Holy shit thanks. I was just trying to be funny. I guess that’s the first time I’ve been paid for being funny… Or something. πŸ˜€

        1. fredwilson

          Its so easy. I’m on my phone right now. I fire up the Coinbase app put in your email address and amount and hit send

          1. JimHirshfield

            Someone should write an app that automatically compensates commenters on Disqus when they’re upvoted (and deducts when they’re downvoted). I’m no programmer, but this is definitely possible with the Disqus and Coinbase APIs.

          2. JimHirshfield

            The message. Too kind.

        2. LE

          “Jim Hirshfield – Funniest guy at even 100x the price! We plan to book him for our next corporate event in Hong Kong. Everyone had a great time!”

          1. JimHirshfield

            Please, no applause, no accolades. Just throw bitcoin.

  12. ben

    The future of the BitCoin is more about future regulation and about the political system (ex: JP Morgan, congress and others who will act when once they are challenged)

  13. JimHirshfield

    Meanwhile, back at the ranch…

    1. LE

      See now if they were reality tv stars and had done 1/10000th asmuch we’d see feet held to the flame and actual prisonsentences.Giudice’s got years in jail for faking info on some 2004 mortgageapplications.

      1. JimHirshfield

        Hypocrisy for sure.

        1. LE

          It’s low hanging fruit for the government to go after. An easy case to get adversaries like that to fold.Once again, it’s legal muscle at work. Government knows that a bank can afford all the legal help they need (and the best of that help, er, top shelf) and do a rope a dope that doesn’t make it an easy case to prosecute.The shock and awe of the battle that the opponents can wage doesn’t make it a road they want to go down since it’s all about the “win” for the prosecutors. This is a human nature thing and it makes total sense as wrong as it is.

    2. pointsnfigures

      A lot of this is laughable. When they start going after Fannie Mae and Freddie Mac with the same fervor, the government will regain some credibility with me.

      1. JimHirshfield

        Don’t hold your breath.

        1. pointsnfigures

          I don’t look good with purple skin so I won’t.

          1. JimHirshfield

            Barney the dino looks great

  14. Brad Lindenberg

    “Be greedy when others are fearful and fearful when others are greedy” – I’ve only ever made money in markets when I’ve bought stock under extra ordinary circumstances – the last time I loaded up was when the US hit its debt ceiling and the markets took a beating.Not sure where BTC will settle but one thing I’m sure if is it’s not going anywhere and will work itself out over time.#BULL

    1. fredwilson

      I could not agree more

  15. William Mougayar

    Bitcoin Promise = (Users + Usage + Capabilities + Value) – Hype / Price.

  16. Matt Kruza

    I really have become convinced that bitcoin (only somewhat… persuade me otherwise πŸ™‚ ), that most people are only into bitcoin because they misunderstand why credit card fees are so high. In short, Credit card fees are between 250 basis points and 300 (2.5% – 3%). Coinbase, who Fred is an investor in, charges 100 basis points + $0.15 to go from bitcoin to dollars. That gap is huge. Totally agree. However, interchange fees can be lowered to make the all in cost 60 – 100 basis points… this is already done roughly in Australia and a few other countries.In short, the real challenge is simply to challenge visa’s and mastercard’s monopoly which allows the banks to continue to offer/chare 150-220 basis points in interchange fees. I also will paste in a more detailed comment I left a few days ago below… Fred, where do you and your company Coinbase disagree with this analysis because I must be missing something.William, fred.. general community? Can you explain why bitcoin is so great? Been a skeptic for like 3 years. Besides the tech / geeky side, the real economic case is really low transaction costs? Am I right on that part?If that is the case, then I posit that really who we have to blame, and all we have to do is fix mastercard and visa’s and the big banks power. More or less credit card fees all in are 2%-3% in the US. The vast majority of that is what is called “interchange fees”.. basically a skim that the issuer gets (think JP morgan). The interchange fees are also what funds the ridiculous credit card offerings that are out there. Here is a breakdown: of that 2-3%- lets assume 2.5% for average:1.7% are these interchange fees.15% goes to visa / mastercard (generally true.. higher on small purchases due to usually a pricing scheme of .11% +.30 cents etc.).5% Credit card processing feeBest I understand it, the big players in the space (Walmart, target, amazon etc.) get close to that 2%, so basically 80-90% are the ludicrous interchange fees. So if the interchange fees can be dropped down to .3%-.5%, most of the case (financial at least) goes away for bitcoin.Lastly, this may seem hypothetical.. but in this attached link is a 2006 article from the minneaplos fed (current fees are similar I believe) which shows no other than AUSTRALIA.. one of the 4 major English speaking OECD countries with interchange fees under 40 basis points.Just curious if there is something I am missing? Fred I belive you are pretty heavily invested in bitcoin and an advocate… and like I said earlier… hella smart.. so I would assume you have this internal analysis and just disagree? Would love to see the opposing side! Thanks!

    1. Matt Kruza

      Basically means credit rewards would go away πŸ™‚ (if interchange fees were lowered). Which would be fine with me. The amount of time some spend trying to game that system is ABSURD!

      1. JamesHRH

        Matt, from a non finance non tech normal…..the biggest problem w the BTC is that it eliminates the middleman.People forget that the middleman provides real value in the CC space (someone to sue, basically).

        1. Matt Kruza

          Completely agree. I am not exactly a big fan of the federal govt. OR big banks.. but I do like knowing that there are HUGE assurances about my money just sitting in a bank

    2. JLM

      .There are three huge benefits of credit cards that are not enumerated.First, it’s the CREDIT itself. Credit cards allow someone to embrace instant gratification by getting what they want now.Second, credit cards are a bulwark for the consumer against wholesale fraud associated with their personal financial affairs.Third, credit cards act as an honest broker ensuring that customer satisfaction is delivered by acting as a dispute resolution locus.These are all reasons why an intermediary is a useful component of a financial transaction.JLM.

      1. Matt Kruza

        Completely agree. That, combined with the fact that their fees will / coud be in line with bitcoin. Its just a matter of public policy and banking interests.. so I think bitcoin will be good to force reform, but it holds almost no long-term structural advantage. Like your elements you pointed out! I think we are in agreement.

      2. LE

        First, it’s the CREDIT itself. Credit cards allow someone to embrace instant gratification by getting what they want now.If I was an academic I would argue (because that is what academics do they “argue”) that that a substantial part of our growth came from people having access to and using credit cards. I think this is obvious (like with housing and mortgages).This extends to people that don’t even use the credit portion (such as myself and I’m sure you). The convenience factor.When I started to accept credit cards in my first business it was the greatest thing in the world. Customers (businesses) like it and we like it because it got around the issue of extending or checking D&B for credit. And it was acceptable because business owners (or people who worked for them) were already familiar with using them personally.Use of credit isn’t all bad by the way. In theory it makes plenty of sense to pay for over time something you are using for over time as long as the rates aren’t usurious. I pay for Starbucks coffee every day because I buy Starbucks coffee everyday.

      3. ssh

        You’re confusing things.The “credit” part of credit cards is issued by banks. Credit will exist for bitcoin also.

        1. JLM

          .I am certain there are unimaginable features of bitcoin that will exist in the future; however, right NOW it does not exist and credit cards do.I also think bitcoin may cure Ebola — could be wrong on that one?JLM.

  17. JamesHRH

    Usual disclaimer: not really up to speed on the BTC.But, I agree with Fred that the metric to watch is adoption by developers. In the end, all startups are about attracting people. SW frameworks have to attract developers first.I am willing to bet that no SW technology has ever been ‘pulled’ into the market because users demanded that developers use it!

  18. jason wright

    “So does a sagging price mean sagging promise?”a sagging price lowers the threshold of entry for a whole new group of potential bitcoin buyers, people who would have remained on the sidelines at $600. a good thing long term.

  19. pointsnfigures

    Happy the price is declining. It will get more people to approach it. The actual price of Bitcoin isn’t important in the short run-the block chain is. William talks about that. It will decline more when the market cracks.

    1. fredwilson

      When is the market going to crack? How did you vote on Friday?

      1. pointsnfigures

        Voted higher short term. Gut feel says market breaks in the Spring. ISIS and interest rates

        1. fredwilson

          And presidential politics kick in tooSpent some time with Rand Paul yesterdayI like that guy but hate some of his intolerant views. Which is a strange way to feel. need to reconcile all of that in my gut

          1. JimHirshfield

            I don’t see how you can reconcile that.

          2. pointsnfigures

            I can’t do the other side, unless that party changes. I am from Chicago, the Dems ain’t changing. We have a slight chance with the Republicans. There are certain social issues that each side will litigate harder than Palestinians/Israel and there is no solution.

          3. mike

            regardless of what he says on the campaign trail, the fact of the matter is that he’s an anarcho capitalist and bleeding libertarian at his core. so he’s the polar opposite of intolerant…ideologically he tolerates everything, which scares middle america republicans

          4. pointsnfigures

            Agree on politics. They will pull levers to make Republicans look bad after November. Republicans will play the same game. It’s a crucible. I like Paul. But I don’t think he will be the nominee. Mainstream Republicans are scared of him

          5. mike

            @fredwilson His biggest financial backer is gay … Peter Thiel . I’ve been backing the Pauls for years. They are good people who have nothing against gays, women, blacks, etc.

  20. ZekeV

    Krugman wrote his recent editorial citing 2/3 decline in price since the 2013 peak as evidence that btc is failing, and suggested that all the “libertarians” who recommended people buy btc should apologize. (This despite the fact that the number of people running btc nodes, number of transactions, value of transactions, dollars invested in btc ventures, etc. — all relevant metrics — are continuing to grow geometrically.) However, when the price goes up by 3X, or 1000X, in a given period, that doesn’t mean anything to Krugman. Actually I have to paraphrase Krugman even to find an argument in his anti-btc rants. It seems his animus, and a lot of anti-btc writing, is motivated by a sense of disgust, that btc is somehow a silly or trivial fad. Take the wackiest wing-nut crypto enthusiast, and use that person as a straw man for the entire phenomenon. It reminds me of people who bash twitter for no particular reason other than that they find it to be trivial. Of course now, the media loves twitter, perhaps for equally empty reasons. The same thing will happen with btc — journos will gradually start to marvel at its “success” when the price inevitably explodes, overlooking that the fundamental usefulness of btc is what defines success. Over the long run, a lot of folks will make enormous dollar profits in btc. And a lot of people will lose great amounts of money in much the same way. Just as all markets have created winners and losers. I don’t know if that’s good or bad, maybe it’s just a law of nature.

    1. fredwilson

      Has Paul Krugman been right about anything in the last decade? I would bet against him almost more than anyone. He is a joke of epic proportions and an embarrassment to the NY Times which is almost as laughable

      1. ZekeV

        Wow, I thought everyone loved Krugman! Well, the last thing he wrote that I really liked was a primer on free trade written around the time that NAFTA was up for debate, and I was in high school.

        1. pointsnfigures

          Krugman was really good on international trade. I know serious serious Freshwater economists that would normally disagree with him on most things that respect the work he did for his Nobel. But Fred is correct. He is a hack today.

        2. gubatron

          you must read Taleb.

          1. ZekeV

            I read his Antifragile stuff, and saw everything through that lens for awhile — the barbell allocation; being positioned to benefit from fortune, without risking total loss. Then I read Thiels startup class notes, and Zero to One, and now I’m not sure if I’m supposed to believe I can predict the future, or if I should assume that is not possible…

      2. Vasia Pupkin

        He was right about interest rates staying low after the crisis even though the Fed printed a ton of money. Don’t dismiss him so easily because of his politics.

        1. clive mossmoon

          Flipping a coin. When addressing the consequences of the housing bust, he like most economists had no clue. Krugman said the consequences NAFTA would be “economically trivial” for the US, because service jobs were just as good as manufacturing jobs. How’d that work out? And trade is his “expertise!” Now he’s advocating a higher minimum wage. What a priceless joke.

      3. trevelyan

        Fred,Krugman was right about the economic consequences of the Bush tax cuts (not stimulatory) at a time when the political establishment was singing their praises. He was critical of the Iraq War, and other policy choices that destroyed the budget surplus and threw the United States so far into deficit that the Republicans immediately fixated on the “debt crisis” once out of power. And then he was right again when it came to the Financial Crisis, in his public arguments that austerity would be self-defeating, an unpopular viewpoint among Republicans who were predicting imminent hyperinflation and a debt crisis.Put more bluntly, if you had bet against Krugman on any of the major policy issues he actually cared about, you would have lost a tremendous amount of money since your predictions – major inflation, a dollar collapse, etc. would have been wildly wrong. And if you were in political power rather than Christina Romer / Larry Summers / et aliae, your decisions would have led to something like five percent point increase in unemployment based on general econometric models.And was Krugman even wrong? In his early columns on bitcoin, Krugman wasn’t picking on the currency so much as pointing to it as an obvious example of how deflationary currencies encouraged hoarding. The second critique Krugman has made of bitcoin is that it is prone to volatility because it lacks “intrinsic value”. As someone who also holds bitcoin, I think perhaps this last week is not the best time to call him out on that….I personally believe that the deflationary nature of the currency and network effects in adoption will counterbalance the lack of “intrinsic value” in bitcoin. So while I disagree with Krugman, his concerns are not silly or unfounded and I would be a lot more concerned if he was using the pulpit of the NYT to push an experimental and volatile financial asset onto an unsophisticated public. In the meantime, the whole attack on Krugman from the fringe right calls to mind nothing so much as Keynes’ observation that the right-wing economists of his day didn’t seem to take an idea seriously unless it involved someone somewhere getting subjected to misery…..

      4. SS

        Haha, Right said Fred. I couldn’t agree more.

  21. Gary Barnett

    So… you believe it will be the transactional plumbing of the interwebz why exactly? Because it’s more convenient for me to convert from my currency into bitcoin and then transact? That aint true plainly.So why is it worth my going to extra effort to use a crypto currency when I have a government backed and secured currency in by back pocket?

    1. fredwilson

      Yes. I have made the case for why many times on this blog over the years

      1. Gary Barnett

        Evidently not.

    2. JimHirshfield

      Forget the money/currency aspect. Transactions include contracts, for instance. These can be authenticated, certified, memorialized using the underlying bitcoin infrastructure called the “blockchain”.

  22. $69340487

    Bitcoin is simply not going to work as a currency with that hard limit of 21 million coins or whatever the number is.

    1. JimHirshfield

      Why? What’s the diff? If a loaf of bread costs 0.000000001 BTC…who cares about the upper limit on number of coins? Every currency has a limited number in circulation.

      1. $69340487

        The divisibility of Bitcoin does not save it from the fatal flaw of the hard limit.It’s like saying if an economy has $1 billion and the amount of goods and services grows, to say double the amount, it’s not a problem because the $1 billion can be divided into 2 units of $500 million, and the price of everything drops by 50%. That’s called deflation.Other currencies dont’ have an upper limit. They can be adjusted to match the demand for and supply of goods and services in the economy.

        1. JimHirshfield

          OK, fair enough. But isn’t adjusting the upper limit of traditional currencies a bad thing? (I’m no economist)

          1. $69340487

            It’s bad if the currency is excessively created without a real increase in demand for and production of goods and services in the economy. That would be the inverse problem – inflation.In a modern economy the currency needs to be able to adjust to the amount of goods and services in the economy, in either direction, and also to avoid catastrophic credit crunches in times of financial panic.

          2. JimHirshfield


  23. ZekeV

    Also interesting to look at decline of price across the entire market of newly created digital assets, versus underlying metrics. I’ve been watching ripple lately. The price is way down. But look at the value metrics — trading volumes and ripple asset issuance have both only recently become non-zero in USD and EUR. Bitstamp was the only ripple issuer doing anything noteworthy until a few months ago, US gateway SnapSwap started issuing assets. It looks like the very beginning of real stuff happening on the ripple network. Still, the price of XRP is extraordinarily low compared with the opportunity. (For the record, while I do own some XRP, I also think the model is possibly flawed due to the potential for misplaced trust in bad issuers to propagate through the network.)There are a few other non-scammy projects that have been cloned from, or inspired by bitcoin. Another great example is the Blake ecosystem. This guy Peter Woods in the UK created an alt coin, BLC, that runs a much more efficient network using the blake algorithm to process transactions. The resources required to run this coin are less than btc, and orders of magnitude less than scrypt-based litecoin clones, without compromising security. He has coordinated with a number of other developers to create a pool of merge-mined alt coins (ie, the proof-of-work solution for any blake algo can be submitted to any of the coins in the pool, similar to btc and nmc). Merge mining can increase the security of a blockchain network by encouraging miners to submit PoW solutions to a coin that otherwise has low profitability for them. You could buy a large double-digit percentage of all BLC for the cost of a Honda Civic at the moment, even though this project has taken in the efforts of a number of talented open source developers for over a year.

    1. fredwilson

      You know your stuff Zeke. Impressed

      1. ZekeV

        Thank you, Fred! Can I quote that in my marketing material? :))

        1. JimHirshfield

          Comments are public and tweet-able. πŸ˜‰

      2. LE

        He may know his stuff [1] but he has failed to be able to explain it in in simple enough terms to make it even remotely understandable.Reminds me of the securities guy talking to the widow about investing and losing her at the use of the word “equities” in the first sentence. Or the real estate agent saying “You’ll need to get the CO of course before you can move in”.[1] I’ll take your word for it as I have no clue at all at what he is saying.

        1. ZekeV

          You are not my intended audience. You should not buy anything you don’t understand. Class Omaha folk wisdom.

    2. jason wright

      Blakecoin is at 0.00000017 BTC on Atomic.

      1. jason wright

        i raise you…

        1. ZekeV

          Now that is a slick ride!

      2. ZekeV

        Actually you’re looking at BlakeBitcoin, which is not *the* Blakecoin (BLC), which has only four zeros after the decimal.

        1. jason wright

          Thanks for the clarification. Trabants are not that valuable. i fold πŸ™‚

          1. ZekeV

            How do you double the value of a trabant? Fill the tank with gas! :)http://trabbiproblem.wordpr…

          2. jason wright

            ha ha!

    3. LE

      ripple asset issuanceWhat is that? (No results on google for that at all).Oh is it this stuff:…Wow what an easy concept that is to understand.

      1. ZekeV

        Yes, the basic concept is easier to grasp than bitcoin b/c a ripple asset is just an “IOU”, like a bill of exchange. The only *actual* crypto asset on the ripple network is xrp itself, which is a token used to pay for functionality. Ripple Labs has not put much of a pay wall down yet, so xrp is primarily useful as a medium of exchange that helps in pathfinding between trades denominated in different currencies. For example, there could be a BTC/XRP pair and a XRP/EUR pair. That xrp is in both pairs allows you to find a path from BTC to EUR. I view this as sort of a proof of concept, at this point, more than a useful service. Because how do I know if I can trust a Ripple asset issuer? I can trust them just fine, until they dishonor a request to redeem an IOU. And if ripple gateways all trust each other, and use each other’s assets to support their balance sheets, then the risk of all (or a big subset of) ripple assets is interlinked. If ripple network takes off, then at the next crypto financial crisis, the contraction in value of ripple assets would be quite rapid and dramatic. Maybe someone will come up with a way to mitigate this risk before real value is placed on the network?

  24. Roman Kadinsky

    price certainly does influence adoption in the less than rational world which we live in… But if the opportunity is the protocol and the technology, then we would all be better served if we could spend/use btc without having to physically(or at all) own it ?

  25. JLM

    .The bitcoin debate has begun to resemble the “global warming” “climate change” discussion wherein anyone with a bit of skepticism is considered a heretic and the mantra of the proponents is a certainty that it is all “settled science”.This, of course, begs the fact that temperatures have not been rising for almost two decades and the more basic argument that the accuracy of measurement technology over the last hundred years is less than the purported change.When the global warming discussion was re-branded to climate change, it was hypothesized that weather was becoming more extreme — though we haven’t had a serious hurricane in a long, long time.Bitcoin wants it both ways — market forces drive prices down and that’s postulated to be a healthy development while also being argued as a justification for a new entry point to buy bitcoin.I am a skeptic, not an opponent but someone who is unconvinced that many of the basic benefits are, in fact, beneficial; or, beneficial in sufficient magnitude to replace existing capabilities.As a skeptic, I have begun to study the subject with a sense of rustling around looking for the Rosetta Stone to clarify the lens through which I am viewing it. I am looking to be converted but I am not able to overcome the basic facts.I am not attracted to financial transactions without middlemen. Middlemen provide great services in complex and sizable transactions. I do not want to pay transaction fees for credit card transactions but I do want exquisite documentation, fraud protection, identity protection, dispute resolution and, oh yes, credit. So, I have to pay for these capabilities somehow and since all transaction fees are ultimately paid by the consumer and reflected in pricing, I am resigned to their inevitability.To tell me I want to engage in transactions without middlemen is to sing the merits of a mild case of leprosy. I don’t want it.I also don’t think that legacy financial institutions are going to allow bitcoin to simply eat from their chili bowl and not take notice. They will continue to evolve.As the debate continues, I am open eared and thoughtful. Skeptical as hell and using USAA, WFB and Schwab to accomplish now what everyone tells me will be possible with bitcoin in the future.Until then, I am inclined to believe that market forces and pricing mean what they have always meant.JLM.

    1. JimHirshfield

      So…no one’s ever given you cash? #nomiddlemanThat said, blockchain obviates the need for middlemen…so they say. But last I checked, Coinbase was a kind of middleman than enabled me to receive BTC.

      1. falicon

        Coinbase in it’s current form is really just a bridge between ‘now’ and what the future could be…they’re positioned to be right in the thick of it *if* the future plays out for BitCoin to be a big thing…but I don’t think the home run is really what they are today…

        1. JimHirshfield

          Well it’ll be interesting to follow thier story

          1. falicon

            agree – USV has a knack for picking stories worth following (and part of why this blog is such a fun ‘must read’ even outside of the community)

    2. pointsnfigures

      I wouldn’t characterize it as that yet. I am very open to skeptics on Bitcoin. It has to prove it’s worth. It also has to prove it’s secure. What if someone hacks the blockchain? Could be a massive domino effect of adverse consequences.

      1. LE

        What if someone hacks the blockchain?Oh boy white men [1] have that all figured out already you didn’t know that?[1] The theme I am talking about is how many times have you seen “white men” (of course I”m one of them) tell you something as absolute fact that then turns out to be proven untrue by other white men down the road. But when they make the initial assurances they are always so certain and almost nobody is cynical or skeptical as to whether those statements will stand the test of time.

        1. sigmaalgebra

          Wait until someone wins an Abel Prize by showing an efficient, open-source algorithm that shows that P = NP [1] (thus, trivializing bitcoin mining and breaking most means of encryption) or builds a quantum computer that will do the same work via massively parallel, brute force enumeration! Bright people, some well funded, are working on both as we type today![1] Currently P = NP is a good candidate for the most important problem in pure/applied mathematics and computer science. P is the set of all problems for which we have an algorithm that will find a solution in time that is just some polynomial in the size of the input data to the problem. NP is the set of all problems for which we have an algorithm in P that can check if a proposed solution is correct. Easily P is a subset of NP. But are the two sets equal? No one knows how to settle this.BTW, the notation NP is from computer programming language syntax and is bad mathematical notation syntax; in math, NP would have to be a product of some kind, N times P.Alas, we have to put up with the computer programmers! NP abbreviates non-deterministic polynomial where the non-deterministic part is from the possible role of using random numbers.E.g., one of the problems in NP is taking a large positive whole number and factoring it into a product of prime numbers — that this can be done is the fundamental theorem of arithmetic. Given a positive whole number p and prime numbers r and s, checking if p = rs is easy and, yes, can be done in time a polynomial in the size of the input data. So, checking if p = rs is in NP. Okay, But does that mean that the problem, given p, finding r and s is in P? No one knows.Set NP contains enough treasures to revolutionize civilization and even life on earth, that we can have in just polynomial effort, if the algorithm is also efficient enough, if P = NP. E.g., there are informed claims that an algorithm that shows that P = NP would essentially trivialize all of mathematics, that is, the theorem and proof parts.

      2. JLM

        .Of course someone is going to attempt to raid bitcoin in some nefarious and dastardly manner. It is inevitable.To drink the koolaid and piss sunshine, bitcoin is attempting to supplant financial systems which are being regularly attacked by the Russians, the Chinese, the Iranians and a boatload of other bastards on a regular basis.Thieves will always attack any pool of wealth. It is as certain and reliable and predictable as the law of gravity.As the famous bank robber Willie Sutton said: “I rob banks because that’s where the money is.”Any digital construct can be breached either with a purely digital attack or with violence against the infrastructure which creates an opening.Bitcoin will be no different.JLM.

    3. LE

      I am not attracted to financial transactions without middlemen. Middlemen provide great services in complex and sizable transactions. I do not want to pay transaction fees for credit card transactions but I do want exquisite documentation, fraud protection, identity protection, dispute resolution and, oh yes, credit. So, I have to pay for these capabilities somehow and since all transaction fees are ultimately paid by the consumer and reflected in pricing, I am resigned to their inevitability.Agree with this 100%. Middlemen are typically less valuable to those who have more time than money. I kind of like back in the day when the travel agent would save you the time of figuring out where to stay on vacation or when to fly or whatever and just take care of all the details for you.Likewise I hire a painter to paint the house. In a sense he is a middleman since he takes care of all the details of painting the house without me having to do that job. For that matter I could have him do the labor and buy the paint. But I don’t want to even do that.But to your point in the case of financial transactions the fees that are charged by credit card companies are well worth it instead of having to run collections yourself.A tenant of mine currently can’t pay rent (they will pay a late fee). They say that some checks they were given to them by their customers “haven’t cleared yet”. I considered allowing them to just give me a credit card in order to shift the risk to the credit card company. CC make money by providing financing. This is a case where they currently pay by depositing cash directly into my bank account. That’s the deal we have. Don’t mail me a check put the money directly in the bank. I’m not going to allow them to use a credit card though because a) it’s for a different business – I could but would rather not have to fool with more paperwork (which I’m already drowning in) and b) I think they will deposit the money and it’s low risk so I’ll save the % in this particular case. c) I don’t want them to know the name of the other business (it will show up on their credit card statement..)

    4. sigmaalgebra

      becoming more extreme How the heck to measure that, scientifically, meaningfully, convincingly?Or given that the global warming debate couldn’t settle on WTF the temperature was, temperature that in labs we can measure to an accuracy of 0.01 C like the group I was in at the NIST did routinely long ago, how the heck could everyone agree on climate change? Of course, they couldn’t. So, the alarmist community had an open door to scream “sinful, evil humans with ugly, filthy carbon pollution causing disastrous climate change” for each drought, flood, hot spell, snow in October, cold winter, blizzard, tornado, hurricane, crop failure, rapid weed growth, etc.Apparently the change from global warming to climate change was deliberate strategy: As I recall, there was a memo saying that, since the predicted warming didn’t occur, need to change tactics and talk about climate change. I am a skeptic, not an opponent but someone who is unconvinced that many of the basic benefits are, in fact, beneficial; or, beneficial in sufficient magnitude to replace existing capabilities. But, but, but there’s to be a party, a big party, maybe on Long Island, with corks popping, back slapping, new Ferraris, with young, gorgeous, blond decorations in the right front seats, and you want to be left out of the party?I join with your skepticism and desire for solid evidence. But lack of solid evidence is not evidence of no chance of winning. Instead, in some situations of poor evidence, some people take a flyer, get a gut feel, play a hunch, throw some darts, and still win. I’m staying with the solid evidence approach, if only because I can, but I can understand how, with enough people with no projects with solid evidence and, thus, just throwing darts, some of the big wins, maybe even a majority, will be from dart throwing.

    5. Tom Labus

      New Yorkers would not agree with about Sandy being a non event. That was some storm, with ocean temps about 10 degrees above norm with got whacked pretty good

      1. JLM

        .Fair play.JLM.

    6. falicon

      Somehow I completely disagree with you on the high level (about global warming AND bitcoin)…and yet agree with your basic logic and points.Global warming is going to be a “frog in boiling water” situation…eventually we’ll wake up to it, but probably only after we’re beyond a critical tipping point…Bitcoin allows for crowdsourcing the middleman…there’s still the concept of a middleman, but it’s essentially ‘the cloud’ or ‘the masses’ (however you want to label it)…the incentive and the cost for the work being done by the masses changes in what I think is beneficial to the whole. (in some ways it’s the open source vs. proprietary software arguments).That being said, I continue to be skeptical that BitCoin (in it’s current form) will be as big and important as others (who are *way* smarter than me) seem to think…I think it’s interesting and has great potential, but I don’t know that it’s a paradigm shifting sort of thing per-se…

  26. iggyfanlo

    I think Crypto currencies have an amazing future, but the price trajectory of one (albeit the leader) is, in my opinion, being driven by many more factors than it’s value as that:1. Store of value (IRS ruling). Look at the chart of silver (another store of value) over the last several years… similar pattern but BTC over shorter period of time. In “quiet” times, stores of value (e.g. precious metals) drop, If “crisis” (read hyperinflation OR deflation or political risk) emerges again, the prices will rise.2. Dollar versus ALL other currencies. It BTC is a proxy basket of all currencies, then BTC like all others, with deflationary forces gripping EU and Japan, then BTC will fall against the US$3. BTC is one of many potential emerging crypto currencies. It has/had the early lead and hype; as such, it’s a high beta trade… more up, more down. The block chain protocol has been adopted by others4. BTC is also viewed as a speculative “trade” against “rising tech fortunes, if you’re not in VC or startup world, it’s perceived as a “high beta play” against tech and probably social media in particular; check the price chart of SOCL index and overlay against BTC. Very similar trajectories.5. Finally, it’s a real currency with which to transact; however, the current volumes, while growing enormously, are FAR below the hype, meaning credit card and other wire transactions dwarf crypto… when that balance really begins to shift, then we will see more value gain, but MORE importantly, LESS volatility and it will feed on itself.I believe ALL the above factors have played a part, but when number 5 dominates, BTC and other cryptos will have won the day

  27. vruz

    Or, paraphrasing it succinctly: It’s the networks, stupid!It’s always the networks/markets.

  28. Mike

    Is it possible to create a bitcoin wallet that when you deposit cash (USD, EUR, etc), your bitcoin is completely hedged against your local currency so that your purchasing power in local currency is constant regardless of bitcoin price flucuations? I guess you’d have to have couterparties.. is the BTC market liquid enough for something like this?

    1. tunces

      Some companies are beginning to offer such services – take a look at Coinapult / Bitreserve. In the future it might be possible to hedge with smart contracts, which will not carry counterparty risk. There’s a company called Hedgy working on this, but I’m not sure about their progress.

  29. Bernard Desarnauts

    What if the biggest issue to Bitcoin adoption right now was its name? aka think HTTP vs Dollar?

  30. Beautyon

    The price of Bitcoin doesn’t matter. What Bitcoin can do is what matters, and its the only thing that matters. People building the wrong business model against Bitcoin’s featurs does not change the nature of Bitcoin. As soon as you stop thinking about Bitcoin as an investment or money, you will begin to really understand it:… The price in the long or short term is irrelevant; only the correct business model matters.

  31. JG

    It’s not the decline that poses the biggest threat to Bitcoin, it’s the volatility. For Bitcoin to achieve the promise of becoming the transactional currency of the Internet, it needs to be a stable platform, otherwise the speculators who profit on volatility will crowd out the mass consumers. Figuring out a way to peg to the USD or some basket of currencies wouldn’t be a bad idea.

  32. Seth Hoskins

    I’d like to hear about what you’re seeing, Fred. I remain positive, even without your knowledge base, but I want to hear about the tangible apps and specific benefits that you’re seeing developed.Bottom line, I think investors in Bitcoin might simply be getting impatient. The progress to be seen might just be way more incremental than the innovation implies.

  33. Such Investor

    Glad to hear you’re buying, Fred. Just wrote a post a few days ago about how much smart money is coming into bitcoin right now, and how that will affect the price as we flirt with YTD lows:

  34. Tegknot

    While I don’t believe price is the most important part of Bitcoin I do believe it’s very important. Especially now in the early stages; because price is what most people care about first. Exciting prices excite new adoption, and also help fund more development. If a bitcoin is donated today, a developer could sell half it for $160 to help get to a conference, and if the price is rising they might be able to sell the other half a few months down the road and get an updated computer to do developing on.

  35. btcnyc

    I’m a developer and I’ve noticed that the smartest hackers and entrepreneurs I know are no longer interested in Bitcoin. They were interested early past year and all the way through early 2014. I saw them hack on projects, trade and so on. And now they’re over it. They’ve either cashed out or are still holding a moderate amount but no longer engaged in any other way.So I agree with you – it is important to look at hackers and entrepreneurs. But the ones I’m seeing entering btx now aren’t the good ones. They’re people following the money and the trend (which is partly why we are seeing a lot of products that are not getting mainstream traction.)

  36. Hiro_Y3

    Wow, this thread is as active as the bitcoin subreddit. Thanks Fred for being accessible and open with your views outside of those within the VC club. It’s really great that you and Marc Andreessen and his team are unafraid to relate with the public. I’m really beginning to wonder: will Silicon Valley emerge as Wall St. 2.0? So much innovation …

  37. A J Cohen

    Let the crowd decide or fund. Just put an ATM in front of them. They will convert $$ and then vote with their btc. Circle Bank says: “They can store as much as they want, there’s no fees, and it includes all the offline storage we provide as well as full insurance on all deposits.” $26M in VC funding & seasoned founders says this concept has legs…..

  38. AetherForce

    Bitcoin solves so many problems it is emotional hard for people to grasp. intellectually it is pretty simple actually.…The founding fathers would love it and for good reason. The Linear Leak issue is still the biggest problem.

  39. CryptoOptimist

    There are a few major issues with Bitcoin right now as far as mainstream aka retail adoption.These are not bs theoretical issues but the issues we have faced on the street trying to make Bitcoin “Stick” This comes from pure asphalt and pavement groundwork not irc whiplash.1. Mobilizing Bitcoin owners to support merchants in a focused and consistent manner.2. Giving normal folks a reason to own bitcoin.3. Giving normal folks an easier way to purchase bitcoin in person.These are issues that MUST be overcome and not by flicks of the wrist but by lots of grass roots footwork and at the very least 5 year plans. Bitcoin will take at least 20 years to reach it’s true value potential. Paypal laid the ground work and not it is time to replace the underlying plumbing as well with block chain tech.We here in NYC have been on this problem for the past 8 months and even tho we are leading the bitcoin retail market the challenge is not signing up new merchants but “Making Bitcoin Stick” on the street.…We should all be putting our heads together to solve these problems.

  40. fredwilson


  41. jason wright

    i would genuinely be interested to see if it’s possible to observe any fluctuation in price linked to this blog post.

  42. fredwilson

    I mean if it doesn’t work as infrastructure then the price will be zero somedayThink of buying Bitcoin as buying stock in http 25 years ago

  43. William Mougayar

    Those getting into Bitcoin now should do so to use it, not just hold it. Price drop will hurt a few, but will benefit many.

  44. pointsnfigures

    The market is inefficient right now. Not enough players in it. Also the current exchanges aren’t set up where they can take care of pays/collects/settlement and the other things exchanges need to do. I wouldn’t trade on them.

  45. ParsnipCommand

    Right now should be about 98% building the bitcoin infrastructure, not evangelizing more people to buy and pump the price

  46. JimHirshfield

    What’s with you? You don’t like my rye sense of humor?

  47. JimHirshfield

    Wishful thinking

  48. pointsnfigures

    short it.