Cryptocurrency Fuels More Hype than Fear
Let me explain
After a few short years of investing in cryptocurrency and preaching its gospel, it appears that some venture-capital experts are finally listening.
Some may still believe that investing is driven primarily by “Greed and Fear”, at Morris+D’Angelo we view this as an old and misused concept; investing is not about greed, greed is a human constant and a commonly misused phrase.
“Speculating” might be a better word to describe this old-fashioned motivation and notion (Greed and Fear). Investors exchange sweat, toil, money, ideas, Intellectual Property, etc. in the hopes of a return (economic, social, psychological, etc.).
Venture Capitalist’s that enter into cybercurrencies now that the price is very high aren’t investors, they are late joiners, speculators, and/or are likely fools. Some big-name venture investors are plunging deeper into the arena, excited by the prospect of big returns, and perhaps, changing the nature of venture investing.
Crypto-evangelists believe their “Initial Coin Offerings” or ICOs are offering new ways to fund start-ups; this could upend the $500 billion, a 50-year-old institution of venture capital itself.
In most ICOs, entrepreneurs sell “digital tokens” related to a service they plan to build using blockchain technology; in some cases, they sell options to buy the tokens. If the service is successful, the value of the tokens will presumably rise, and its creators will have funded their companies without ceding any of their ownership stakes to venture capitalists.
While working with our customers at Morris+D’Angelo who need advice and for any implementation of their Initial Coin Offering, we recognize this as a good “Modern Solution” for old tiered financial methods.
There are some experts who are forcefully bullish on the trend. They think it’s a bigger deal than the Internet, a bigger deal than any of the industrial revolutions. This may be where the “Hype” comes from, but let’s be realistic. Business and Technology are changing the way we do things now for “Modern Business”. One thing is certain; we are and will be facing major regulatory challenges.
This year cryptocurrency start-ups and projects have used ICOs to raise $3.2 billion, according to ICO tracker Coinschedule. In some months this summer, ICO funding eclipsed that of traditional venture start-ups. In the second and third quarters, 90% of venture funding for blockchain-related start-ups came through ICOs, according to a report by Silicon Valley Bank. “It is already significantly changing the venture landscape,” says Greg Gilman, a partner at venture firm and incubator Science Inc. 1
Some experts perceive cryptocurrency as fraudulent or worse. Suspicions arise when large amounts of money are raised for companies that aren’t on the “map” yet and more importantly, at a stage in their business development where they are good stewards of large amounts of money or would know how to distribute it.
Well, plain and simple, there are going to be risks, and large amounts of money can still be raised. “Initial Coin Offerings” without a real purpose at the start are an interesting prospect, but, nonetheless, we have provided guidance for an infusion of cash worth over $30M-Dollars. Even some long-time cheerleaders for cryptocurrency lament today’s hyped-up gold rush mentality.
Blockchain is a force that will change many industries in the short time to come
“Blockchain is to traditional business models what Watt’s steam engine was to the pre-industrial age. Its ultimate impact in banking, finance, agriculture, data security, and all sorts of business and consumer transactions is currently in its infancy. We are witnessing a change beyond our cumulative comprehension ”
A Debate Beyond What We Commonly Know
The debate is playing out between firms, but—actually, it’s more about Talented Professional who have Vision and an open mind; It’s about a different future. Those who have difficulty seeing beyond their credit line at their neighborhood Venture Capitalists Office, make their living taking big risks, but when it comes to cryptocurrencies, most are proceeding cautiously.
Investing other people’s money requires much more stewardship then by investing and speculating ones own money. Owning cryptocurrency without a purpose would be speculating at a time without rational reason.
Hyped tech trends come and go with the wind where we are in Silicon Valley, but this one is more complicated, more arcane, more legally suspicious, and a bit sexier. Blockchain is the technology that powers digital currencies like Bitcoin and Ether, and the growing ecosystem of related software and start-ups around them has been called a revolution, with growth opportunities comparable to those of the early consumer internet. And as with the early dot-com days; we’ve been there before.
Most venture firms aren’t permitted by their investment agreements to speculate on digital currency. Doing so also potentially exposes a firm to additional regulation and disclosure. Lawyers trained to be risk-averse, have a protective perspective that embraces “Rain” at every “New Thing”. there are some firms who have obtained permission from their investors, or helped their investors make their own direct investments; so they exist.
Another Way: Turning to Hedge Funds
As an alternative, some venture firms have backed hedge funds that invest in cryptocurrencies. These strategies are complicated and might create challenges with the fund’s investors, some of whom may balk at paying Venture Capital fees, who then are paying fees to hedge-fund managers. To avoid this, some venture firms might invest directly in the firm that runs the hedge fund, instead of, or in addition to the fund, which charges the fee.
There are constantly new ways that either have evolved in our Financial Services Industry, or new Technologies and Methods are introduced. At Morris+D’Angelo, we have the networks that allow us to excel at providing the most up-to-date Financial Advice and Service.
Daniel frequently provides Media Content via Workshops, Podcasts and Printed Articles on topics like Cross-Border Transactions, Wealth Preservation and Planning, Global Banking and many other high-level financial topics that serve and demonstrate the Value of our Global Network that should be of interest to those who need Private High-Wealth Services. If you wish for Daniel to speak to you or your Professional Group, please contact us.
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