Spencer Bogart Discusses Challenges for Incumbents and Startups in the Cryptocurrency Industry

Spencer Bogart, a partner at Blockchain Capital, discussed with CNBC on July 26, 2018, the difficulties and challenges facing startups and incumbents in the cryptocurrency sector. He looked at new potential entrants into the market and discussed his thoughts on the wave of institutional investors moving into the cryptocurrency industry.

Startups to Beat Incumbents in the Cryptocurrency Sector

In the interview, Bogart was questioned about the role of incumbents in the emerging cryptocurrency industry. Bogart chuckled and stated that intellectual property and patents are not the key deciding factors in cryptocurrency. While incumbents have power and assets, they are generally slower to pick up new trends or changes in the market.

“I think the way to fail in crypto is to think that IP and patents are going to be your path to success,” said Bogart. “In general, any of the incumbents are going to have a hard time in the space. It’s very difficult; it’s a dynamic space. You need to be focused, so I think it’s a quintessential disruptive innovation that’s going to favor startups over entrenched incumbents.”

According to IMD, an independent Swiss business school, a large majority of executives saw digital disruption from incumbents as a greater threat than startups. That data, however, is very much dependent on the industry.

Since cryptocurrency-related startups can easily raise capital through initial coin offerings (ICOs), cryptocurrency projects often have an easier time going to market than startups in other tech industries. Crypto startups can then take advantage of the advantages that come with a small organization—faster innovation capability, greater agility, a culture of experimentation and risk-taking—all of which are key benefits for a fast-paced space like the cryptocurrency industry.  

While incumbents have strong foundations, stability, and established networks, they often lack the agility or speed required in a fast-paced environment.

Unlike most industries, the cryptocurrency industry is also run on decentralized blockchains that are often open source, which allows others in the cryptocurrency community to contribute to the project. The cryptocurrency industry can therefore make use of their communities to cover more tasks than other technology-based industries.

Bogart Expects Bitcoin to Reach New Heights in 2018

Despite Bogart’s overall bullish attitude towards cryptocurrencies, he mentioned to CNBC that traders and investors should “expect to see new lows before you see new highs.” Bogart, however, believes that recent positive sentiment about BlackRock Inc. and Bitcoin’s potential to be listed as an ETF by the SEC could easily push the price up.

Bogart also noted that Bitcoin’s price was not just dependent on positive news. Negative news concerning trade wars or even global currency wars could prompt people to buy and hold Bitcoin, increasing its value.

“I think any number of catalysts can send Bitcoin to explode higher,” said Bogart.

Bitcoin has experienced strong price increases in the last few days. Although the token dropped to just below $6,000 on July 24, 2018, Bitcoin surpassed $8,000 and quickly rose to $8,300 in the next few hours.

Bitcoin is currently worth $8,208 as of July 27, 2018.

Hard to Anticipate What Regulators Will do to the Crypto Sector

When asked for his thoughts concerning the SEC potentially accepting Bitcoin ETFs, Bogart mentioned that it would most likely occur in 2019. The SEC is likely to spend a good amount of time assessing and thinking over its options before committing to a decision.

Bogart also mentioned that regulations may come sooner than expected, since retail investors are already exposed to the cryptocurrency sector. Furthermore, even institutional investors are moving into the cryptocurrency space, with Coinbase and Bitwise offering products for institutional investors. Bogart noted that the innovation will, however, move elsewhere if the SEC does not make a decision about the future of cryptocurrencies in the short, medium, and long terms.

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