Hacker News Reader

Comment by zmanian | Hacker News Reader

Without another speculative bubble, running a bitcoin exchange is likely to be a terrible business. Competing with Coinbase in that terrible business in that terrible business is potentially disastrous.

View on HN

What made competing with Coinbase so hard? the fact that Coinbase was so well funded?

I suspect that the VC industry has pretty much anointed Coinbase as the defacto north american exchange winner.

Given how little actual consumer interest there is in Bitcoin at the moment. This is probably what matters.

It'd be great for investors if they could just anoint winners. But in practice, consumers decide and investors follow.

One of the tenets of competitive advantage is the ability of a business's competitors to enter the market. Running a Bitcoin startups has extremely high fixed costs that cannot be mitigated (contrast with typical startups with mostly variable costs); if VCs aren't giving them funding, as is apparently the case with Buttercoin, then there's no way they can even create a reasonable Bitcoin service, especially one that could compete against Coinbase and its mountain of funding.

It's hard to compete with a similar company if they have a load more money than you. Take Uber. Maybe you build a better taxi app but they have $5bn raised and you don't. Then they can subsidise, run at a loss, spend loads on ads and so on.

... make fake orders to competitors and try to steal their drivers, etc.

And in reality, for a capital intensive business like this, those that the consumers get to choose from are decided by the investors.

Reply on news.ycombinator.com