I've been reading a lot of articles lately, reviewed over 30+ videos on the topic, and I'm still unclear at $1000+ per bitcoin where the opportunities lies?
Is it
- Mining (purchased or hosted)
- Startup built on top of Bitcoin (financial solution)
- Buying Bitcoins ($1000+? Higher?)
Am I missing something? Love to hear your thoughts.
I've been into bitcoin since 2011, and here's my brief take on where the opportunity lies.
- Mining: Bitcoin mining is too difficult unless you invest a significant amount of money into it, think over $10,000 ... and it only becomes profitable if the price of bitcoin does another 10X (which it may.
- Mining: Altcoins may be the quicker path to profits (http://coinmarketcap.com/) ... mine some altcoins and then converting them to bitcoin through one of the exchanges like cryptsy.com
- Buying: I am waiting for another price crash before I buy back into bitcon, I'm hoping it will drop to $500. I see it rising back up over $2000 if it does drop, however now that the Chinese are into bitcoin, its a real possibility that the price will just keep rising.
- Arbitrage: The price difference between exchanges is massive. You can now buy bitcoin at btc-e for $1000 and sell it instantly at mtgox.com for $1200. If you had $100,000 to arbitrage with, that is a cool $20,000 profit. The probem is that these exchanges may go down at any time and you risk losing your money/bitcoins.
-Startup: You could build something with real value, although the competition now is fierce to build a product with real value that has not already been built. VC's are getting hot for bitcoin startups, check out press on Ripple Labs, BTC China, BitInstant, Coinbase, etc.
There are some other opportunities, like buying a bitcoin ATM machine from a franchise (Robocoin, Lamassus) or something a little more in the grey area like starting a bitcoin casino.
There's lots of opportunity in cryptocurrency if you look hard enough, I feel though that the window of opportunity for massive profits and value creation is narrowing due to the eyeballs looking at the bitcoin world right now.
So whatever you want to do, take massive action and do it fast before you lose momentum and first movers advantage.
By "opportunities", I assume that you mean speculation opportunities.
I feel that the boat has sailed for mining, meaning that it's not a good investment to purchase mining equipment. Using a profitability calculator, such as the one available at bitcoinx.com, you can see that it takes several hundred dollars worth of mining equipment to have a profitable operation *at the start*. Profitability will decline unless the price also rises. My mining rig was netting me about 1 BTC/month at this time last year, down from 4 BTC/month at the same time in 2011. Now, I'm lucky if I'll see a BTC in a decade. Mining really is an arms race that only very serious investors with a lot of cash to risk should consider. Hosted mining encounters the same problem, but at least the logistics are easier! However, you don't have neat hardware to sell when you want to get out.
Buying Bitcoins (or other altcoins) is probably the best speculative option available presently. You can check out http://coinmarketcap.com to see some altcoins that are making moves. Be wary of anything, though, because only Bitcoin, Litecoin, and Namecoin are names I trust with certainty. The latter two are still small enough to be manipulated.
Consider also any arbitrage opportunities. It may be a 1% or 2% gain, but it's something! Do that weekly and your money will be doubled in less than a year.
Starting a business is hard, but it's probably the best bet in the long run. You could start a Bitcoin-centric business, that is, one that serves the Bitcoin community as an exchange, broker, escrow, tumbler (beware of local laws outlawing this), or protocol-centric system.
Or, you could start a business that simply accepts Bitcoin. What's the easiest way to get Bitcoin, people ask me. "Convince others to give it to you," I respond. Offer a product, even if that product is knowledge in the form of a book or pamphlet, and ask for payment in Bitcoin. There are some in the community who will support you just because you accept Bitcoin.
The trick about the business is beating others to the punch. Dropbox doesn't accept Bitcoin. Become the first online storage system to accept Bitcoin for real and you'll instantly have a community that will be interested in your service.
I rambled a bit, but I'd be happy to talk!
I'm going to suggest a few ideas that are off the beaten path. Besides buying and holding Bitcoin (which I think is a good bet over the long term):
1) Start a mining pool
Bitcoin mining is finished for the little guy. You need to prepay for expensive mining rigs that quickly stop being profitable once you finally take possession.
But almost all miners need to use a mining pool. Most pools look amateurish. Talk to Bitcoin miners and find out what they're missing and build it. You will get to skim a nice 2-3% off all the mining profits without investing in expensive mining hardware.
2) Lend money to Bitcoin traders
Don't have the stomach to risk your money by investing in Bitcoin? You can profit by lending your money to people who do.
Bitfinex.com allows you to do this. You can currently lend out USD at 200%+ APR to people who use it to buy Bitcoin on margin. The risk is low to nil as the loans are backed by the borrowers BTC and Bitfinex will close out their position and repay you if the value of their holdings drops too much.
Call me if you want to get feedback on your ideas.
I've been running a business focused on Bitcoin commerce and popularizing Bitcoin for 6 months.
I believe that the opportunities in mining are mostly past for current entrants in the space.
The opportunities to earn large capital gains through the increased valuation of speculative investments in bitcoin are certainly there, though very high risk.
Opportunities for earning cash flow, either in bitcoins or dollars, by providing services to bitcoin users are huge however, and provide the option of derisking by holding some of your income in dollars and some in bitcoin.
Current areas which have been hugely successful for some players are:
1) Bitcoin exchanges (bitstamp, mt. gox, btc-e)
2) Hosted online wallets/banks (coinbase, blockchain.info)
3) Bitcoin payment processing for e-commerce (bitpay, coinbase)
4) Gambling (Satoshi dice, satoshi circle, justdice)
Emerging areas:
1) eCommerce - Gyft is killing it, by acting almost as a point of sale exchange into gift cards. Opportunities are available for sellers willing to give discounts based on the expectation that bitcoin's value will rise.
2) Remittance - That is, moving money internationally. In some ways, Bitcoin handles this itself and will get better as exchanges with decent volume are developed for more local currencies. Though there is probably a great opportunity for a company that can use Bitcoin to make moving money from one country to another effortlessly. I really can't see how Western Union isn't totally screwed. Even if it adopted bitcoin, it would have to reduce it's cost structure tremendously to keep up with new entrants.
3) Safe storage - Bitcoin thefts from online wallets are still rampant. If you could create a wallet with the convenience of online, and guarantee, even INSURE peoples savings. You will win. Though that is a very hard thing to do.
4) More payment processing, specifically automated. Parking meters, laundromats, coke machines. It might be too early for that yet, but it could be pretty big.
That's enough for now. I've learned a lot from my time in the business, and am in contact with many of the major players.
Shoot me a line if you'd like to learn more.
Build an exchange optimized for API use.
Although the current exchanges vary considerably in the quality of their APIs, they are all amateurish.
For example, the best of the lot, MtGox, provides a real-time stream, which, risibly, the others do not, but MtGox's real time stream relies on TCP/IP's retransmission protocol to ensure no losses. This means application layer failures will violate the integrity of TCP/IP's retransmission protection. All MtGox provides is a timestamp on its streaming events -- which means you cannot be sure you have received all events. This can cost automated traders serious money.
Professional financial applications need serious integrity.
For example, when SAIC contracted with the city of Orlando to automate their toll road collection, the contract stipulated that any losses due to failure to report transactions would be paid directly out of SAIC's pocket. I wrote the transaction telecommunications protocol to have an application-level serial number combined with a multiply redundant, distributed audit trail of the transactions created in real time so that central accounting could always be assured that they could detect the loss of a transaction in transmission and, upon such detection, be assured that when they queried the network for the point in the stream where the missing transaction occurred, the stream would still be retrievable from that point.
Transaction transmission reliability is just one example of the opportunity.
