How Owning Bitcoin Is Owning An ETF On The Whole Bitcoin Space
By Tony Gallippi, co-founder and CEO of BitPay, Inc.
The Bitcoin economy is grassroots, techie, voluntarist, young, and fragmented. Investors looking to invest in the space are finding a lack of investable companies. Most Bitcoin startups range from 2-5 employees, and the Angel rounds, if you can find one, are typically seeking $500k-$1M in capital.
Businesses interested in the payment technology don’t always know where to start either. Bitcoin wallets work completely in reverse from credit cards and debit cards, so none of the existing payment gateways designed for processing card transactions will work with bitcoin.
And there are many misconceptions and misreporting in the press. It seems like every article is about drugs, money laundering, hacks, extortion, and anything else that seems like an enticing headline.
Taking a step back to look at the whole Bitcoin picture, you need to travel back in time to 1994. This was the early days of the Internet. Just one year prior, in 1993, NCSA Mosaic launched as the first “web browser”, and the reactions varied wildly. Entrepreneurs saw the innovation and got to work, but investors didn’t have many options for viable investments. And there seemed to be an article every other day “the Internet is bad, the Internet is dangerous, the Internet is full of scams”.
Fast-forward 20 years to the present day, replace “the Internet” with “Bitcoin”, and read today’s news. “Bitcoin is bad, Bitcoin is dangerous, Bitcoin is full of scams” are basically the headlines you will find today. It’s the same articles from 20 years ago. They were wrong then, and they are wrong now.
Bitcoin is a disruptive innovation, and it will follow an adoption cycle similar to e-mail, and more recently VOIP. VOIP was adopted by businesses and consumers because it saved money on long distance calls. Anyone with an Internet connection could make phone calls, and video calls, for little or no cost. Services like Skype and Vonage made this easy to use for the average consumer. This dramatic improvement in communication efficiency spawned virtual offices, tele-working, and global collaboration.
Bitcoin will follow a similar adoption as VOIP. In fact, many times I refer to bitcoin as “money over IP” because its practical uses are similar. To use bitcoin today, you need to understand IT security. Businesses have those skills, and the bitcoin wallets are being innovated at a rapid pace to make the security easier for consumers. Once the wallets are more secure for consumers, we will see an explosion in the adoption of Bitcoin. It’s not a matter of if, but when.
Businesses and consumers both have pain in financial transactions today. International payments are difficult, and costly, and take several days. Bitcoin can solve the same problem in seconds, for little or no cost. Once liquid markets for bitcoin are established around the world, much like the ISP model of the mid-90s got people connected to the network, then the global adoption of bitcoin will accelerate.
Focusing on the business adoption, payment processors like BitPay are building an interface layer on top of Bitcoin that is easy for businesses to adapt to and understand. For consumer adoption, exchanges like Bitcoin-Central are getting licensed to work with the banking system, making it easier for people to buy and sell bitcoin from their traditional bank accounts. And merchants like WordPress are endorsing Bitcoin to monetize emerging markets, where all existing payment networks are failing.
In the past 3 months, the innovation coming to Bitcoin and bitcoin-related services has accelerated. Investors and VC firms are taking notice and starting to follow the space, and nibble on some startups. But the infancy of many bitcoin companies is still perceived as being too risky. So what are the other options?
Bitcoin, the currency and the payment network, is itself an Exchange Traded Fund (ETF) on the whole bitcoin space. Every innovation that happens around bitcoin increases its value. Every new business that adopts bitcoin increases its value. Every new market and exchange that opens, especially in places like India, Greece, and Argentina, increases its value.
The market cap of Bitcoin is simply the number of coins in circulation, currently around 10.7 million, times the price per bitcoin. The value fluctuates, but the market cap of all bitcoins is around $300 million. That’s good for some things, but that is not enough of a money supply to be usable to businesses that need to move large payments, or very frequent payments. The velocity of money just isn’t fast enough, and the liquidity just isn’t deep enough, to replace bank wires and credit cards en masse...yet.
But what if the money supply of bitcoin was $1 billion? or $3 billion? That would start to be more usable to corporate enterprise. That would be more usable for people looking to trade in-and-out of stocks, of gold, or of real estate. That would start to provide liquid markets around the world, which can enable more global ecommerce, remittance, and payroll.
The Bitcoin revolution is just beginning. BitPay has seen explosive grown and now has over 2700 merchants using its platform to accept bitcoin payments. Companies are innovating around bitcoin at a rapid pace. The niche bitcoin space is unlike anything in history. It’s not necessary to invest in a Bitcoin startup in order to profit from the space. Many bitcoin companies are self-funded and the capital requirements are low. By simply owning bitcoins, you can profit from the success of every bitcoin company. There’s no need to pick the winners. BTC is the investment that gives you exposure to the currency, to the payment network, and to every business building products and services on top of bitcoin.
Anthony Gallippi, co-founder and CEO, saw a need for bitcoin payment processing and founded BitPay in 2011. As a start-up, Mr. Gallippi is involved in all of the day-to-day operations including new business development, marketing, and customer service. Mr. Gallippi has 15 years of experience in sales and marketing working in the Robotics industry.
Bitcoin is a new financial technology, invented in 2009 as the first peer-to-peer digital currency. Using bitcoin, it is possible to send money like an email - to anyone, anytime, anywhere- without going through a bank or government or corporation. Mr. Gallippi has a Bachelors in Mechanical Engineering from the Georgia Institute of Technology.