View
139
Download
0
Embed Size (px)
Citation preview
INVESTING IN BITCOIN-BASED TECHNOLOGIES
Krzysztof Piech, PhDWarsaw School of Economics and InvestOn Ltd
Young Markets 2015 „Exploring the Future of Finance”Warsaw, 17th September 2015
WAYS OF INVESTING IN BITCOIN-BASED TECHNOLOGIES
Investment in hardware Speculation – bitcoin as money or financial instrument Investment in startups Financial services Long-term financial investment
INVESTMENT IN HARDWARE Speed race on the market progres in microchips is faster than in traditional computer markets (!); nowadays approaching the technological frontiers (limits of physics)
Evolution: Mining based on personal computers Mining with computer graphic cards Mining with specialised equipment designed only to bitcoin digging Mining pools Large bitcoin mines
Present stage: end of technical race; beginning of cost-competition Looking for cheap electrical power
SPECULATION – BITCOIN AS A MONEY Investment on spot markets Simple buy-and-hold strategies Active trading: daytrading etc. Trading with bots (algotrading) Arbitrage between markets Investment with leverage
SPECULATION – CNTD. Bitcoin derivatives – futures Arbitrage Also with leverage This is what we are doing at InvestOn
Liquidity providers to the bitcoin exchanges Bitcoin investment funds Altcoins – tech innovations coupled with pump-and-dump (100% in a day is quite common)
Ponzi schemes
BITCOIN – STILL A FRACTION OF TRADITIONAL FINANCIAL MARKETS
SIZE OF MARKETS
bitfinex bitstamp btce coinbase okcoin 0
50
100
150
Turnover on major bitcoin USD exchanges
millions of US dollars
btc-china huobi okcoin 050
100150200250300350400 Turnover on major bitcoin CNY
exchangesmillions of US dollars
okcoin-1wF
okcoin-2wF
okcoin-1qF
796-1wF
0 200 400 600 800 1000 1200 1400 1600 1800
Turnover on major bit-coin futures exchangesmillions of US dollars
Spot markets: - US+EU:
$420M- China:
$880M
Futures: $3980M
Source: InvestOn
Time period: one month (May 2015)
1-MINUTE PRICE DIFFERENCES BETWEEN BITFINEX AND OKCOIN DURING ONE MONTH
Source: InvstOn.
SELECTED KPIS OF INVESTON GENESIS – 2014
Initial capital in mid-December 2013: $10,000.
Some extra opportunities appeared, e.g. 35% of returns in 1 week. Usually however on average 4.3% per week only. The results: rate of return c. 1000% (13.5 months).
21/Dec
4/Jan
18/Ja
n1/F
eb15
/Feb
1/Mar
15/Mar
29/Mar
12/Apr
26/Apr
10/May
24/May
7/Jun
21/Ju
n5/J
ul19
/Jul2/A
ug16
/Aug30
/Aug13
/Sep27
/Sep11
/Oct25
/Oct8/N
ov22
/Nov6/D
ec20
/Dec3/J
an17
/Jan31
/Jan
100
200
300
400
500
600
700
800
900
1000
1100
EXAMPLES OF ALTCOIN PRICE CHANGES
INVESTMENT IN STARTUPS Fin-tech startups Bitcoin exchanges – first companies (but mines) Bitcoin payment processors Various blockchain-exploring companies
Own (mainly R&D-focusing) companies setup by fin institutions (e.g. large banks)
Other startups, e.g. covering legal services, security Investment funds
Source: State of Bitcoin, Q2 2015, July 2015, http://media.coindesk.com/2015/07/BTC-vs-internet.png
FINANCIAL SERVICES Payment processors, e.g. BitPay (U.S.), InPay (Poland) Lending and borrowing – P2P, e.g. BitLendingClub (U.S.), GetLine.in (Poland) You can lend people your bitcoins (without bank intermediation)
Remittances Auctions (of arts) first such an auction in Poland, June 2014
Equity crowdfunding – selling shares of companies for bitcoins First (regulated) campaign run in Poland, 2014 Other based in tax-heavens (e.g. Havelock Investments based in Panama)
LONG-TERM FINANCIAL INVESTMENT Almost no long-term financial investment Bitcoin is not treated as long-term investment (too risky, too volatile) Expected turmois in the future driven by recessions; however some picks possible due to financial crises (e.g. Grece)
Lack of regulations – too high risk for financial institutions
RISKS Startups – they often fail; in bitcoin environment – even more frequently (large temptations to steal bitcoins)
Security threats – bitcoins stolen = no chargebacks Bitcoin price volatility New technology – future is unknown Evolution in financial world: from bitcoin only to blockchain-based technologies Blockchain – general purpose technology (?)