as bitcoin fervor nears tulip-esque levels, it may disappoint some of you to consider that the ultimate winner of bitcoin will not be some cool new startup with fancy venture capitalists, but probably more likely your current bank or brokerage.  plus, if bitcoin is successful -- either as a store of value or a means for transactions -- i find it hard to believe that those interactions with bitcoins will *not* be with apps or accounts already established on your phone.

when thinking about bitcoins more as an investment (aka store of value), it’s far too specialized and inefficient to think that i’ll need a separate account to manage just my bitcoins -- as opposed to with my existing brokerage accounts where i manage my stocks, bonds, and currencies.  right now i have an account with coinbase (which is killing it), but it’s really just an intermediary between bitcoins and my linked bank account.  

thus, in the ‘store of value’ scenario, the winners go to schwab, ameritrade, e-trade, merrill lynch, etc. so that users can manage their portfolio of all assets in one synchronized account.

when taking the transaction route, which bitcoin is superior at in many ways when considering fees, speed, and identity (or lack thereof), it would be painful to consistently manage a separate account with ample bitcoins for when my spending happens.  i don’t want yet another app or yet another account to forget a password for or to keep funded if and when i want to pay with bitcoins.  transactions need to be seamless -- whether i’m paying with my amex, debit card, or bitcoin wallet.

in this scenario where bitcoins are the best way to buy things, the winners to go chase, bank of america, visa, etc.  in other words, just let me pay and not worry about managing balances and transfers.

better yet, i would be surprised if i couldn’t just use my google wallet or scan my finger on an iphone and complete my transactions with bitcoins.  those that solve the user flow will win, and i’d put the edge in favor of incumbents at this point.

a specialized app can’t win…  at least, not that many of them.

right now it’s the wild, wild west in bitcoin land.  scams are abundant and new bitcoin ‘wallets’ are popping up left and right.  not just in the u.s., but around the world, every country / currency is finding ways to interact with bitcoins -- whether that’s to buy suspect goods on a black market, or speculate and trade in the massive volatility that is bitcoin.

this point in time is analogous to past bubbles, such as the internet bubble where a silly number of companies pop on the scene trying to capitalize on this new craze.  in short time, however, we’ll be left with two buckets of “winners”.  

the first bucket will be those select few early entrants that survived.  think of this bucket as the cohort of internet companies from the bubble that still stand -- priceline, amazon, yahoo.  

yet, think of how much money has been made off the “internet” by incumbents in related industries, and i’m guessing this second bucket accounts for something like this of the total cash flows.  most of the money, of course, being made by existing players that learned to leverage the internet.

before that, there was the car bubble, and just like internet stocks, everybody was making cars.  hundreds of car companies emerged overnight, and now we’re left with ford, chevy, and so on.  new entrants come in later, but they are evolutionary.  not revolutionary (except for tesla, maybe).

having studied past bubbles, i have been anxiously awaiting the next.  it’s so predictable on how to make money.  with a solid game plan, sans emotion, there is a lot of opportunity to profit from bitcoin.  

1) speculating in the asset, though i think that time has passed… or at least is only applicable to the nimblest of traders.

2) recognizing early winners who will bring bitcoin to the masses… these aren’t buy and hold, but given the early stages of bitcoin, getting a piece of the purest play bitcoin companies you can will work in the near term.

3) farther out, the profits and market share will go to companies that will both dominate bitcoin and also for which bitcoin is a rounding error on their books.  just imagine if apple cornered bitcoin transactions, or if paypal became the paypal for bitcoins.  this won’t move ebay stock, but it will be good for a) consumers and b) all the companies these companies acquire in the process.

there’s so my systemic risk involved with bitcoins, for governments could shut this down in a second and bitcoins are dead.  until then, there is not just opportunity, but bubble-level opportunity.

i, for one, am ecstatic...

Posted
Authorjonathan hegranes