A former Goldman Sachs VP who founded a crypto hedge fund says betting on bitcoin is like betting on the internet in the 90s

A former Goldman Sachs VP who founded a crypto hedge fund says betting on bitcoin is like betting on the internet in the 90s

The cryptocurrency market has exploded this year with over 1,000 digital currencies now on the market. 

The price of bitcoin, the first and largest cryptocurrency, has captured the most attention, with Wall Street CEOs from JPMorgan’s Jamie Dimon to Goldman Sachs’ Lloyd Blankfein weighing in on the coin this month alone. 

It’s up over 450% this year at near $4,400 per coin. 

But bitcoin’s meteoric rise doesn’t mean that it’ll be the top-dog crypto forever. 

Matthew Goetz, a former Goldman Sachs vice president and cofounder of BlockTower Capital, a Connecticut-based crypto hedge fund, recently told Business Insider that bitcoin and other cryptocurrencies are technologies like any other, and as a result, are susceptible to being usurped by a digital currency with superior tech. 

“Bitcoin is the most entrenched, it has very stable protocol, it doesn’t change a lot, and it has a very strong developer base, but at the end of the day it is still software,” Goetz said. “There is some chance that something an order of magnitude better than bitcoin, technologically, could come along.”

Kind of like how Facebook replaced MySpace as the go-to social media site.

To be sure, Goetz said a bitcoin rival can’t just be slightly better. Bitcoin’s massive scale would require the hypothetical coin to have substantially better capabilities.

Here’s Goetz:

“It’s something like Facebook. If someone creates a new Facebook that has slightly better features, say 10% better. That’s great, but network effects are strong. So, that new thing isn’t going to kill Facebook.”

Bitcoin isn’t the only crypto that has to worry about competition. 

Ethereum, which has been touted as a bitcoin rival, operates in a slightly different space, according to Goetz. Bitcoin was built to be a currency, whereas Ethereum is a blockchain platform on which other applications can be built. 

“Ethereum is competing on features and now has four competitors,” Goetz said. “And it’s all about who has the most cutting edge cryptographic technology, who can build features the fastest to make developers come build their smart contracts and decentralized applications on top of those platforms.”

Smart contracts are a computer protocol based on Ethereum’s blockchain technology that facilitates and enforces a contract or exchange. Just because the developers of Ethereum were the first to introduce this technology to the market doesn’t mean they will win-out in the long run, according to Goetz. 

“If you look at other industries across history, there’s a real chance that just because the first mover got out there doesn’t mean that that’s the one that ends up ultimately winning and capturing all the value,” he said.

“For some cryptocurrencies that are in a more competitive space, like decentralized file-storage, there are a number of projects attacking that,” he added. 

And there are incumbents, he says, such as Amazon Azure and DropBox.

But it’s still early days. Goetz says if you liken cryptocurrencies to the internet, then we are still in 1992. Just like bets during the early days of the internet were risky, so too are bets in the crypto market today. 

“You could be right on the thesis that cryptocurrencies are transformative and you could make what you think is the right bet at the time, but remember one time you had Yahoo and then this thing called Google came along,” he concluded. 

Join the conversation about this story »

NOW WATCH: An Italian economist told us Berlusconi and Trump are the same … except Trump is meaner

Bitcoin shoots past $1,800 for the first time

Bitcoin shoots past $1,800 for the first time

Bitcoin is trading at another record high on Thursday. The cryptocurrency is up 4.59% at $1853.55 a coin after Ulmart, Russia’s largest online retailer, said it would begin accepting bitcoin, Cryptocoin News says. 

The announcement from Ulmart comes despite Russia’s central bank saying it would wait until 2018 to consider allowing the use of bitcoin and other cryptocurrencies. At the beginning of April, Japan’s regulators announced bitcoin is now a legal payment method in the country. 

Bitcoin’s has gained in 18 of the past 20 sesssions, a streak that has added nearly 60% to the cryptocurrency’s price. It began the run trading at about $1,170 a coin. 

Bitcoin has shrugged off China restricting trade, the SEC’s rejection of two bitcoin ETFs, and threats from developers to create a “hard fork” that would split the cryptocurrency in two, on its way to a gain of more than 95% so far this year. 

It has been the top performing currency every year since 2010, aside from 2014.

Traders are currently on the lookout for the US Securities and Exchange Commission’s ruling on whether it will reverse its decision to reject the Winklevoss twins’ exchange-traded fund.

Back in March, the SEC rejected two bitcoin ETFs, saying it “is disapproving this proposed rule change because it does not find the proposal to be consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.”

A ruling will be handed down no later than May 15.

Join the conversation about this story »

NOW WATCH: SCOTT GALLOWAY: I believe every time Amazon reports a profit a manager gets yelled at

Bitcoin soars past $1,700 for the first time

Bitcoin soars past $1,700 for the first time

Bitcoin seems unstoppable right now, topping $1,700 for the first time on Tuesday.

The cryptocurrency trades up 3.45% at $1,720.82 a coin, as trade grinds higher for the 16th time in 18 sessions. It has gained nearly 50% during its current streak.

Tuesday’s gain comes without any real catalyst as traders await the US Securities and Exchange Commission’s ruling on whether or not it will reverse its decision to reject the Winklevoss twins’ exchange traded fund.

Back in March, the SEC rejected two bitcoin ETFs, saying it “is disapproving this proposed rule change because it does not find the proposal to be consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.”

Bitcoin has shrugged off China restricting trade, the SEC’s rejecting of two bitcoin ETFs, and threats from developers to create a “hard fork” that would split the cryptocurrency in two to post an 81% gain so far in 2017. 

There has been some good news as well. 

At the beginning of April, Japan’s financial regulators said that bitcoin was now a legal payment method in the country, and days later Russia said it would consider bitcoin and other cryptocurrencies in 2018.

Bitcoin has been the top-performing currency every year since 2010, aside from 2014. 

SEE ALSO: The price of Bitcoin just hit an all new high — here’s how easy it is to buy your first one

Join the conversation about this story »

NOW WATCH: This animated map shows how religion spread across the world