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January 10, 2014, 12:59:46 AM |
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Wall Street and How we can use it to Help Bitcoin
There are many benefits about increased Wall St. interest in BTC.
Some people see the investment industry as the enemy,
Please allow me to give some food for thought for those who are cautious about the investment business:
Wall Street/ the investment business is not monolithic- it's not all comprised of the top bankers at the 5-10 firms people list off when they speak of bad guys --- there are thousands of firms, hundreds of thousands of professionals and the overwhelming majority did no to harm others. It is most fair to judge people by what they themselves have done.
Yes, the bailouts sucked and were evil...but they were not the fault of everyone in the business.. Bailouts took money from citizens by force and threat of force (more accurately from future generations) and gave it to people to buy mansions and yachts as a REWARD for failing with incredibly stupid decisions in buying sub-prime debt. This is terrible. 1) not all of us participated in the bailouts.....in fact many of us were vocally against them, the bailouts benefited only a tiny number of those on the inside -- it's especially unfair to criticize members of the investment profession who received no benefit for something they were against 2) even having said that, lets be fair....does PRIMARY blame really go to the bankers or to Congress who seized the money in the first place? Do you know anyone who would turn down a huge check which could make themselves wealthy and save their business? (By the way, some banks did not even want the bailout but were forced to accept it, look it up)
Most people on Wall St. understand QE and many are not fans of the Fed policy - carful about lumping the Fed in with Wall St. yes, at the very very top levels it's closely connected....but we are talking about 20 people ....not the other one million of us who don't even work for those 20.
There are many very good and positive aspects of Wall St. like VCs / if we are defining this as the investment business in general then "Wall St." includes venture capital firms (some of which are physically located on the street called Wall St., most of which are obviously not). -- VCs bring a good deal of talent and money to companies and they help them grow -- business is very complex these days and VCs are some of the smartest people around: they have the know how and connections to help Bitcoin companies get in the door at huge and valuable partners, avoid pitfalls, hire the right staff etc.
Later stage Wall Street provides additional capital to help industries mature: Google, Facebook, Twitter, Amazon etc. ALL went public using Wall St. and all saw a benefit of that being the next growth stage.
Some people on Wall St. actually know what they are doing -- yes, there are scumbags and greedy people (not nearly as many as the movies like to portray) but in such a highly competitive business there are many really brilliant minds -- people who have excelled all their life and who work very hard and very smart -- they get new concepts and can indeed add value (some are fools of course)
Even the greedy don't see money as a zero sum game - the most successful, even notoriously ruthless bankers really DO want to make those around them rich....taking the cynical view maybe they do it only because its good business....but nevertheless most (especially people like VCs and PE funds and hedge funds) want nothing more than to own a (big) chunk of your thing and make you the next Zuckerberg.
If Bitcoin is to grow it needs real capital and Wall St has that capital....right now every Bitcoin on planet earth is worth less than the clothing store for teenage girls called The Limited and it's worth less than 5% of Nestlé. I love Bitcoin and believe in it, but sorry, with those current small numbers is a FAR way from being the serious piece of global economy I and everyone who believes in it knows it can be...In order to even start to get there it needs 10, 20, 40 times it's current market cap.....getting to the $100-400 billion range. At that rate one BTC is worth $10,000-40,000 and we are STILL not even as large as a top 20 company or even 1% of Internet transactions / a real currency. TO GET these levels of capital, Bitcoin needs real investors, real commitments -- that means lots of participation from institutional investors who make Winkelvoss sized commitments.....ATMs and store POS adoption simply can't add up.
Increased trading and investment also stabilizes the price-- traders trade on inefficiency -- the BTC markets are very inefficient right now -- as they grow and more investors, particularly large institutions participate then the price will grow and stabilize which means more merchants can accept without fear of wild swings.
Wall St. / institutional money has already helped Bitcoin a great deal --- if you think that investment and growth in companies like Coinbase is a good thing and you are happier with a price of 700-900 versus 100-300 then part of that thanks goes to Wall St. A huge amount of the growth last year was from institutional buying such as Winkelvoss and many OTC official and unofficial trades..... the number of early adopter economic techno geeks with over $1 mil is very small..... the mass of small investors just don't move the market like large ones. (10,000 $1000 people equals one $10 million person)
Bitcoin may change the world but it's extremely unlikely to obliterate old models without integrating with them first and changing them from within -- 1). Disruptive technology typically changes and integrates old tech-- some is killed off, most remains and adapts. IBM changed its model many times, old print media generally changed to adapt to the Internet -- for Wall St. It will be the same.....if Bitcoin is globally transformative it may kill a Western Union or two, it will create a few new Google sized companies and it will integrate with most old-school banks etc, transforming them --- old structures are too established to just disappear 2) for Bitcoin to have that kind of impact we are not just talking about the five year target of $100-400 billion that Winkelvoss (and me!) have.....we are talking about several trillion and a price per BTC of $3-4 million --- that may happen, I hope it does....but to think it will happen in five years is overly optimistic I think.....and IF IT DOES go to $4 million per coin (especially somehow doing so my magically bypassing where all the capital resides) guess what? Even at $4 million it STILL is not large enough to replace Wall St. ....it's about the size of the assets of one or two large banks, or about the market cap of the four largest companies....huge but still not the reset button on the world kind of huge.
FAIR BALANCE: the bad side of Wall Street
Will Wall Street people lie to you and rob you? Almost never....but they WILL stick it to you and squeeze every penny they can from you and, if your lawyer isn't smart enough to understand dilution clauses etc. they will whipsaw you.
Wall Street in general doesn't get Bitcoin and doesn't care about itsome of us are very passionate believers, others see it as a quick buck and don't even care if it has a real future as long as they can make a buck.
Personally I'm looking at some Bitcoin related stuff and I plan not to deal with Wall Street much, by choice. ** I'd rather deal with Bitcoiners. Not because Wall St. is full of bad guys but because so few "get it" yet.** and I like both communities but I generally like the BTC community a bit more.
(Written by Bruce Fenton a Bitcoin fan who comes from a career in the investment business)
TL: DR: Wall St. should be dealt with cautiously, offers many great advantages and is here to stay and will bring a net benefit to Bitcoin. Be realistic about how things change and grow historically, even the most disruptive technologies our world has ever seen.
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