This document discusses various ways to invest in Bitcoin and Bitcoin-based technologies. It outlines investments in Bitcoin mining hardware, speculation through Bitcoin trading and derivatives, investing in Bitcoin-related startups, using Bitcoin for financial services like payments and lending, and potential long-term investment though that is still limited due to Bitcoin's risk and volatility. It also notes some of the risks involved like startup failure, security threats, price volatility, and uncertainty around Bitcoin and blockchain technology evolution.

1. INVESTING IN
BITCOIN-BASED
TECHNOLOGIES
Krzysztof Piech, PhD
Warsaw School of Economics and InvestOn Ltd
Young Markets 2015 „Exploring the Future of Finance”
Warsaw, 17th September 2015

2. WAYS OF INVESTING IN BITCOIN-
BASED TECHNOLOGIES
Investment in hardware
Speculation – bitcoin as money or financial instrument
Investment in startups
Financial services
Long-term financial investment

3. INVESTMENT IN HARDWARE
Speed race on the market
 progres in microchips is faster than in traditional computer markets (!);
 nowadays approaching the technological frontiers (limits of physics)
Evolution:
 Mining based on personal computers
 Mining with computer graphic cards
 Mining with specialised equipment designed only to bitcoin digging
 Mining pools
 Large bitcoin mines
Present stage: end of technical race; beginning of cost-competition
 Looking for cheap electrical power

4. SPECULATION – BITCOIN AS A
MONEY
Investment on spot markets
 Simple buy-and-hold strategies
 Active trading: daytrading etc.
 Trading with bots (algotrading)
 Arbitrage between markets
 Investment with leverage

5. SPECULATION – CNTD.
Bitcoin derivatives – futures
 Arbitrage
 Also with leverage
 This is what we are doing at InvestOn
Liquidity providers to the bitcoin exchanges
Bitcoin investment funds
Altcoins – tech innovations coupled with pump-and-dump (100% in a
day is quite common)
Ponzi schemes

6. BITCOIN – STILL A FRACTION OF TRADITIONAL
FINANCIAL MARKETS

7. SIZE OF
MARKETS
0
50
100
150
bitfinex bitstamp btce coinbase okcoin
Turnover on major bitcoin USD
exchanges
millions of US dollars
0
100
200
300
400
btc-china huobi okcoin
Turnover on major bitcoin CNY
exchanges
millions of US dollars
0 500 1000 1500 2000
okcoin-
1wF
okcoin-
2wF
okcoin-
1qF
796-1wF
Turnover on major bitcoin
futures exchanges
millions of US dollars
Spot markets:
- US+EU:
$420M
- China:
$880M
Futures:
$3980M
Source:
Time period: one
month (May 2015)

8. 1-MINUTE PRICE DIFFERENCES
BETWEEN BITFINEX AND OKCOIN
DURING ONE MONTH
Source: InvstOn.

9. SELECTED KPIS OF INVESTON
GENESIS – 2014
Initial capital in mid-December 2013: $10,000.
Some extra opportunities appeared, e.g. 35% of returns in 1 week.
Usually however on average 4.3% per week only.
The results: rate of return c. 1000% (13.5 months).
100
200
300
400
500
600
700
800
900
1000
1100
21/…
4/Jan
18/Jan
1/Feb
15/F…
1/Mar
15/…
29/…
12/…
26/…
10/…
24/…
7/Jun
21/Jun
5/Jul
19/Jul
2/Aug
16/…
30/…
13/S…
27/S…
11/…
25/…
8/Nov
22/…
6/Dec
20/…
3/Jan
17/Jan
31/Jan

10. EXAMPLES OF ALTCOIN PRICE
CHANGES

11. INVESTMENT IN STARTUPS
Fin-tech startups
 Bitcoin exchanges – first companies (but mines)
 Bitcoin payment processors
 Various blockchain-exploring companies
Own (mainly R&D-focusing) companies setup by fin institutions (e.g.
large banks)
Other startups, e.g. covering legal services, security
Investment funds

12. Source: State of Bitcoin, Q2 2015, July 2015, http://media.coindesk.com/2015/07/BTC-vs-

13. FINANCIAL SERVICES
Payment processors, e.g. BitPay (U.S.), InPay (Poland)
Lending and borrowing – P2P, e.g. BitLendingClub (U.S.), GetLine.in
(Poland)
 You can lend people your bitcoins (without bank intermediation)
Remittances
Auctions (of arts)
 first such an auction in Poland, June 2014
Equity crowdfunding – selling shares of companies for bitcoins
 First (regulated) campaign run in Poland, 2014
 Other based in tax-heavens (e.g. Havelock Investments based in Panama)

14. LONG-TERM FINANCIAL
INVESTMENT
Almost no long-term financial investment
 Bitcoin is not treated as long-term investment (too risky, too volatile)
 Expected turmois in the future driven by recessions; however some picks possible
due to financial crises (e.g. Grece)
 Lack of regulations – too high risk for financial institutions

15. RISKS
Startups – they often fail; in bitcoin environment – even more
frequently (large temptations to steal bitcoins)
Security threats – bitcoins stolen = no chargebacks
Bitcoin price volatility
New technology – future is unknown
Evolution in financial world: from bitcoin only to blockchain-based
technologies
 Blockchain – general purpose technology (?)