Despite the negative publicity that bitcoin has garnered so far this year, one early backer of the digital currency and prolific technology professional is planning to invest millions of dollars more into the virtual currency.
It was reported by the Wall Street Journal this weekend that Andreessen Horowtiz, a venture capital firm co-founded by Marc Andreessen, will pour “hundreds of millions” more into businesses involved in bitcoin over the next few years, particularly in Coinbase. The company has already invested approximately $50 million.
Andreessen noted that he is completely “unfazed” by what has transpired in the past month or two with bitcoin exchange platforms shutting down, virtual heists taking place and values declining. It’s likely that the co-founder of Netscape Communications is going to stay on in the bitcoin even if the price drops significantly, which is trading at half of its value from its November high of around $1,200.
Of course, Andreessen isn’t the only significant player to be dumping money into bitcoin. We reported last week that Bill Miller, a well-known fund manager at Legg Mason, is making substantial investments in bitcoin ventures. In addition, Michael Novogratz, a principal at Fortress Investment Group, a private-equity enterprise, announced Wednesday that the firm would be acquiring a stake in Pantera Bitcoin Partners, an investment fund with a focus on bitcoin and other virtual currencies.
With the likes of the Winklevoss twins and the aforementioned individuals, the bitcoin industry is booming. However, many of the cryptocurrency’s critics have argued that this is one of the signs of a bitcoin bubble and have likened it to the dot-com bubble in the 1990s with so many angel investors looking to make a quick-buck and surmise that each bitcoin startup will become the next Google or Facebook.
“One thing we do know for sure: Where there’s new money, Wall Street will inevitably find a way to capitalize on it,” wrote an analyst at Consumer Reports. “Two prominent examples are a private-equity trust completely comprised of bitcoin currency, open to anyone with $25,000 or more to invest and a willingness to tolerate front-end, back-end, and administrative fees of 1.5 percent and 2 percent (and that’s not total fees, but each fee). There might even be a bitcoin exchange-traded fund to invest in soon if the Securities and Exchange Commission approves its registration.”
It could be noted, though, that the investments being made in bitcoin are quite minuscule compared to other ventures that Wall Street allocates its funds to. One report discovered that angel investors in the United States have doled out an estimated $100 million, compare that to most Wall Street pros dumping fortunes into U.S. small cap stocks, energy manufacturing and real estate.
If suddenly all of Wall Street engulfed itself into bitcoin then it could be on the cusp of a bubble. For now, perhaps bitcoin’s bubble will still have time to grow.