It’s that time of year where people try to predict what’s going to happen in the upcoming year. I will take the risk of looking completely foolish a year from now and provide my predictions for 2018:
Bitcoin will crash
What goes up, will come down
Bitcoin’s remarkable price increase was the story of 2017, and nowadays it seems like everyone is talking only about bitcoin. Regardless of what you think of Bitcoin, it is clear it is not used to transact today (except for illegal activity) and it’s very difficult to see how that changes in the future. What is left is a store of value mechanism, which some would argue is similar to gold. However, I haven’t heard any good argument why bitcoin as a store of value is much better than gold, and why there is such a sudden need to replace gold with cryptocurrencies. I also don’t remember anyone complaining about how difficult it is to buy, hold or sell gold (obviously through ETFs and not physically). People who are buying bitcoin these days are mainly speculating, believing that cryptocurrencies are the new and easy way to get rich. But at some point the price will stop going up, and then people will be stuck with a “currency” which has zero use. Is such a currency worth $100K, $20K, $1K or $1? The funny thing is that all the answers can be true- there is no logic in any single price for it, and therefore the same mechanism that made Bitcoin’s price increase so rapidly will also bring it down at the same pace. (For full disclosure- I hold a small amount of Bitcoin as a “schmuck insurance”)
More money will be funneled to fewer startups
We started witnessing this phenomenon in the past few years where several startups are ‘crowned’ as winners by investors who keep flooding them with disproportionate amount of funding. Companies like Uber, WeWork and MagicLeap raised billions of dollars from investors, and many others raised hundreds of millions from SoftBank’s $100 Billion vision Fund. This new game now requires other investors to step up and raise even larger funds (such as Seqouia’s new $6B fund) to be able to compete with SoftBank. I believe we will continue to see this trend in 2018 since SoftBank’s Vision fund is far from being exhausted and other funds will need to catch up. Having these mega financing rounds available for startups significantly increases the upside opportunity for early investors and entrepreneurs, but it also comes with a lot of risk- upping the ante to a whole new level. We will be able to assess the results only several years from now.
Innovation will spread outside of Silicon Valley
This is also not a new phenomenon, but I think we will see this trend further increase in 2018. With more VC money available outside the Bay area and outside the US in general, more startup hubs popping around the world, more experienced talent available outside Silicon Valley, and everyone reading the same tech posts thus reducing the asymmetry of information which existed before — it is constantly getting easier to launch startups in more places around the world. When you add the fierce competition for talent in the Bay area, the expensive rent, and the high cost of living in SF — I believe we will keep seeing innovation spreading outside the Bay area.
