HN Explorer

Is Bitcoin invsetment a game of chicken?

3 points by MarkPNeyer ↗ HN
I am very perplexed as to why Fred Wilson and other vc's would invest money in bitcoin startups without actually buying bitcoins themselves. It seems that them putting just a small amount of money into BTC would give coinbase a much higher chance of success.

So here's a thought: Maybe the wealthiest people in the world see bitcoin invsetment as a game of chicken. If someone like warren buffet puts just a few thousand dollars into bitcoin, its value will skyrocket, giving him and all other bitcoin holders an enormous return. Seeing as how so there is so much money looking for safe investment now, a lot of people would follow him. This would mean capital leaving certain markets and going to BTC - which would seriously drop the value of dollars and other government-backed currencies.

A rapid drop in dollar value would leave even more of the wealthiest people in the world will wanting to move their capital to bitcoin, perpetuating itself. This 'runaway bitcoin value' scenario is probably one they wish to avoid. The world's wealthiest people largely know and trust one another; if bitcoin skyrockets, the richest people won't be able to meet in geneva or vale or wherever and make deals with each other. Even if they did manage to all move in unison to put all their money into BTC, the drop in value of government-backed currnecies would probably cause so much instability in the world that none of them want it to happen for fear of government action shutting bitcoin down. so for people with public reputations as solid investors, bitcoin is game of nuclear chicken: first guy to put money in either wins huge or loses all of it.

4 comments

[ 91.0 ms ] story [ 750 ms ] thread
wmf
I think you're massively overestimating the likelihood and size of this snowball effect. If the Winklevosses can't send Bitcoin to the moon, why would Fred Wilson be able to?
MarkPNeyer
The winkelvoss twins don't have reputations as solid investors with a track record of positive returns. People like Fred Wilson and Warren Buffet do. Most people think of the winkelvoss twins as 'those losers who sued facebook'.
hrabago
It always seemed to me that investors who believe in bitcoin startups but don't invest in bitcoins themselves are buying into the concept of a cryptocurrency and what its infrastructure makes possible.

In other words, they're not in it because they think bitcoin's value vis-a-vis the US Dollar is going to increase, they're in it because they believe that cryptocurrency is here to stay, and when bitcoin's price stabilizes and its use becomes mainstream, then the startups they invested in will be in a leadership position in the marketplace.

It would be like investing in banks while not hoarding cash.

lordCarbonFiber
If BTC is to ever become a serious currency it needs stability and market penetration. You don't "invest" in a currency, that's really not very useful for doing the things currency is useful for (i.e buying necessities). All of the people treating BTC as a speculative asset, hording it and playing market games to make huge gains off the idiots that buy high and sell low; these are the people actively hurting the chance of wide adoption. The investments you're seeing, in the infrastructure, that is the smart choice. Not just for the investor but also for the success of the currency. In short, there is no game of chicken going on, just smart investors continuing the smart investing and knowledge of money that made them huge players in the first place.