The course of true love never did run smooth, nor did the ascent of Bitcoin.
For relatively new participants into the cryptocurrency sector, the past few weeks would have been gut wrenching, with investors who clamored into the crowded cryptocurrency trade as Bitcoin began its wild ascent towards US$58,000, punched in the gut as rising bond yields are believed to have sent it in a tailspin.
Bitcoin now trades around US$46,000 (depending on when you’re reading this) and some (especially the new initiates into the space) are wondering if this is the beginning of the end for the Bitcoin bubble, or merely another speed bump in the path of cryptocurrency’s progress.
To understand cryptocurrencies, it’s important to first understand that it’s not money – not in the traditional sense at least.
If we understand money to be nothing more than the means to control resources, then Bitcoin and its ilk are so much more.
There’s no denying that technology runs our lives and cryptocurrencies are an extension of that technology – they are various forms of programmable money – but their true value isn’t in the holding, it’s in the networking.
And the recent filing by cryptocurrency exchange Coinbase for its direct listing on Nasdaq reveals why the biggest names of the future, will be names that investors may never have heard of, yet.
It also reveals a surprisingly small circle of (mostly) men who dominate the incredibly lucrative digital asset landscape in the United States from the now-billionaire CEO of Coinbase Brian Armstrong, to his co-founder, Fred Ehrsam, who went on to create Paradigm Operations.
In the regulatory filing for Coinbase, some of the biggest names backing America’s largest cryptocurrency exchange by volume, are also titans of venture capital in their own right, including Fred Wilson of Union Square Ventures and Andreessen Horowitz’s Chris Dixon.
Trading Bitcoin from when it was as low as US$6, some of the most influential names in the business, including Dan Morehead of Pantera Capital started out as early on as 2012, believing in the space even when it belied belief.
The Pantera Bitcoin fund was created in 2013, just over a year before the Mt. Gox hack of 2014.
But perhaps it was Tyler and Cameron Winklevoss, who famously battled Mark Zuckerberg over Facebook (+1.15%), whose experience could provide insight to investors seriously considering this nascent asset class.
Speaking to Bloomberg, Cameron Winklevoss noted,
“Tyler and I didn’t have 20 years of capital markets experience when we came to Bitcoin.”
“We were very open to this possibility and that’s how we’ve always been, driven by curiosity.”
“In the early days of Facebook, in watching and being a part of that ride, we saw the power of networks, and so many people dismissing social networks as a fad.”
So naturally when Bitcoin came around, the Winklevoss twins recognized the same forces at play,
“It’s a money network. What happens when you put an economic incentive around that network? That’s possibly the most effective network in the world.”
And for those unfamiliar with Facebook’s history, it started small in 2008, and took many years before it’s network expanded to the point where now it’s so powerful, it allegedly can influence election outcomes.
Bitcoin could possibly track the same course.
Right now, getting some Bitcoin is still relatively clunky, and comfort with dealing in digital payments and wallets is needed to get off the ground.
But as service providers level up and comfort grows, people will eventually get used to the birth of new money and a portable store of power, just don’t expect that relationship or progress to be smooth.