Naysayers and Cassandras forecast a crash to rival the housing crisis of 2008. Optimists -- or simply those with a long position -- say Bitcoin could reach $1 million valuation. The world of finance will never be the same. Or will it? We asked three of NewsPicks’ smartest Pickers to give us their thoughts on the meteoric rise -- and possible fall -- of cryptocurrencies.

Jason Zweig
investing columnist at Wall Street Journal
Dec 21, 2017

Earlier this month, Vanguard Group, which manages nearly $5 trillion, announced that it will use blockchain technology to improve the delivery of market prices for its index funds and other assets.

To me, this epitomizes both the promise and peril of buying bitcoin.

Blockchain technology is being adopted rapidly by major companies and seems likely to make many other ways of organizing, delivering and storing information obsolete. The potential market is immense, and digital currency is all but certain to benefit.

But which digital currency? It's far from clear that bitcoin will prevail as the currency of choice across blockchain networks. The technology of blockchain can be adopted by almost anyone and adapted to almost any purpose. What would happen to bitcoin, and other existing digital currencies, if the Federal Reserve launched FedCoin?

Investors often blur the vital distinction between what is obvious and what is inevitable. It's obvious that blockchain and digital currency have a bright future, but that doesn't mean that it's inevitable that any particular cryptocurrency will dominate.

Think back to 1999, when it was obvious that the internet would change the world. That wasn't just obvious; it turned out to be an understatement. But it wasn't inevitable that any particular stock tied to the internet would make you rich. In fact, most of the earliest internet companies blazed brightly for a few months or a couple of years, then fizzled. You Google all day long; you don't Lycos or AltaVista or WebCrawler or Excite (and probably don't even Yahoo!). Those were the companies with "first-mover advantage." Instead of paving the way for their own success, however, they ended up paving the way for Google's.

"The early leaders in a dynamic industry almost never turn out to be the victors in the end," I wrote in 1999. Centuries of financial history suggest that "this is not some antiquated rule of how companies used to behave in the days when men wore powdered wigs and wooden dentures; it's more like a universal law that governs how companies evolve in any industry, at any time. Nor does the fact that everything moves faster on the internet nullify this law; actually, the high likely to enforce this law of corporate destruction even faster and more forcefully."

First movers, or pioneering companies and technologies, often have a disadvantage: Their early success proves the practicality and importance of what they're doing, which attracts competitors who ultimately supersede them.

By the same token, the early leaders in cryptocurrency may well be swept away by new rivals. I could be wrong about that, but history suggests otherwise. And if all you know about bitcoin is that you want to own it because it's been going up, you shouldn't be buying it at all.

Peter Kozodoy
Partner // Chief Strategy Officer at GEM Advertising
Dec 21, 2017

Bitcoin is only a small piece of it. This past year, almost half the nation's millennials took part in a vast movement away from banks and into self-controlled and fluid financial exchanges, swapping $17.6 billion on Venmo -- yes, that's billion, with a "b" -- as they eschewed banks and snubbed their noses at credit cards.

Why? Because the payment app is easier. As my generation continues to seek a frictionless environment for everything in their lives, a broad spectrum of companies including Google, Facebook, Apple, and especially Amazon, are all vying to produce an ecosystem of voice-operated home commands and one-word buying prompts. Any company that is in the business of making life easy will be ripe for mass consumer adoption and positioned to get paid a hefty multiple of its revenue from one of the tech big guns looking to win this not-so-easy race.

Jeff Koyen
Blockchain & Cryptocurrency Investor at 360 Blockchain
Dec 21, 2017

For much of the early 90s, AOL floppy disks, then CDs, were more common than cockroaches in New York City. To AOL’s credit, their incessant junk mail put millions of Americans online. Yet, they weren’t really online. Using dial-up modems, they were connecting to AOL’s proprietary, curated, walled network. It wasn’t until 1995 that AOL bridged its service to the web.

Such is the current situation with cryptocurrency. It’s not AOL CDs offering easy access to this strange new world: It’s the Coinbase app, which topped the Apple Store charts during Bitcoin’s $19K bull run in early December. For the record, I’m thrilled to see more non-technical people creating Coinbase accounts and dipping their toes in these rocky waters. I hope they’re investing wisely, but that’s none of my business.

Yet while these average Americans are buying cryptocurrency, they’re not into crypto. They’re buying Bitcoin, Ethereum and Litecoin — the three cryptocurrencies sold by Coinbase. Not accidentally, it was these three coins that skyrocketed in value this month.

As someone who’s been online since the early 1980s (shout out to my Atari 800), I remember the mid-90s clearly. I was that annoying kid brother, distant cousin and drunk friend who couldn’t stop talking about Usenet and Mosaic. Then, overnight, I was the guy you called when your new modem didn’t work. It’s the same thing with crypto traders. We’ve been yammering on about this strange new world for the past few years; our advice fell on deaf ears. Suddenly, we’re the most popular guests at cocktail parties.

What’s lost in the mainstream chatter is the idealism that’s held by many cryptocurrency enthusiasts, especially the early developers who launched coins not to make money, but to change the world. Here we have another parallel to the internet’s earliest days. In the late ‘80s and early ‘90s, the internet scene was marked by techno-libertarians, like Stewart Brand, whose Whole Earth Catalog paved the way for The WELL, an early electronic bulletin board for the internet’s pioneers and big-thinkers. The internet, they said, would usher in a new era of democratic, globally accessible information assembly and dissemination.

Two generations later, in this age of Facebook and fake news, it’s easy to poke fun at this idealism. The average person does, indeed, have direct access to more data, knowledge and opinions than ever before, but very few would describe today’s internet as a bastion of egalitarian idealism.

So it will go with cryptocurrency. The coming years will see regulation and consolidation, celebration and ruination. We will suffer through many painful price corrections, maybe even a Dotcom 1.0-style catastrophic crash. But let’s remember that, even with so much value and money lost, the Dotcom 1.0 crash didn’t scare everyone off the internet. The weak players and scam artists were scared off, proper businesses persevered and the idealists and visionaries kept working.

Even if Net Neutrality turns our broadband connections into dedicated Netflix pipes, the internet has not been turned off. Under the thumb of global telecoms and the FCC, connectivity still has the power to empower people around the world.

When we look back in a decade, the same will be said for cryptocurrency and its underlying technology, blockchain. Bitcoin and its descendents went mainstream in 2017; they’ll suffer through growing pains for several years, which will shake out the bull artists; by 2020, we’ll have a better handle on their practical applications and potential for true change. Whether Bitcoin is worth $1 or $1 million by then isn’t the point. That cryptocurrencies continue to drive innovation is what matters.

Patrick McGinnis
Globally-minded VC & Creator of FOMO. at Author, The 10% Entrepreneur
Dec 21, 2017

Bitcoin: FOMO, Free Markets, and the Fake News.

I’m credited with inventing the term FOMO (Google that, if you’re a skeptic). After years of hard work to conquer my fear of missing out, however, I’ve completely fallen off the wagon. The cause? Bitcoin. Thanks to a 19-fold increase in the price of bitcoin since the beginning of the year, bitcoin is now everywhere. It’s in the social media posts, er, brags, of friends who bought early. It’s all over the news. It’s even in my dreams. No seriously, I recently had dreams about bitcoin two nights in a row.

Just so you know, I didn’t buy any bitcoin, even though I meant to do so years ago. After living through the pain of the 2000 tech bubble during my first year as a venture capitalist, I’m ruined for life when it comes to investing based on FOMO. I just don’t have the stomach. Still, it hurts to watch from the sidelines as fortunes are made.

Stepping back from all the self-loathing, however, I see the current bitcoin fever as a continuation of general havoc unleashed by the internet since my very first experience living through a bubble at the dawn of the Millennium.

First, just as the internet makes access to information entirely democratic, it also allows anyone to take part in the bitcoin frenzy. Unlike previous asset bubbles like tulips, the first wave of tech stocks, and mortgages, anyone anywhere can buy tulips. You don’t have to know some bankers at Goldman to get an allocation and you don’t need to be an accredited investor. This is the free market at work, perhaps as never before. If you want to participate in the madness, all you need is to cash to burn and access to basic technology. Whether you’re a Winklevoss or a 20-year-old living in Kiev or Kinshasa, you can buy on the same terms as anyone else in the world.

Second, bitcoin represents a concerted rejection of the establishment. No matter how many experts – lions of the financial world like Jamie Dimon to Warren Buffett – call for caution, planet bitcoin just shrugs and moves on. In this sense, Dimon and Buffet are like the mainstream media, while bitcoin traders are like the bloggers of Breitbart. Perhaps more ominously, they might also be like the Facebook bandits who served fake news to millions of Americans during the 2016 election.

So, who is right? No one knows. That’s what happens when you live in a post-fact, drain-the-swamp world. When institutions are seen as corrupt and crowdsourced knowledge is trusted over official sources, no one has the answers.

What does this mean for the growing ranks of bitcoin investors as well as all of those FOMO-suffering bystanders? First, it means that lots of people who have no idea what they are doing (and some who do) are making a lot of money. Second, it means a lot of people are at risk of losing their shirts. In the end, everyone will learn the same lesson – markets have no feelings, they are ruthlessly efficient, and they eventually come to their senses. Whether or not you think something is fake news, when it comes to markets, the truth always wins out. Until them, my FOMO will continue unabated.

Ernie Sander
Chief Content Officer at NewsPicks
Dec 21, 2017

Great insights from our ProPickers about the rise of crypto currencies... To see more smart curation and conversation, download the NewsPicks app in the App Store. (Android version available soon.)