Get ready for a wave of new bitcoin start-ups, said Chris Dixon, general partner at Andreessen Horowitz.
Bitcoin start-ups are a "very interesting area" and present an opportunity for the creation of a range of new businesses, including companies focused on merchant services—like PayPal—bitcoin exchanges and companies with banking models that focus on storing the digital currency.
"What the critics are underestimating is that you had a first wave of bitcoin start-ups and people were interested in it and it was kind of cool," Dixon said. "But now what I think you are seeing—if you just talk to the smartest people in Silicon Valley now—is that some of the best entrepreneurs are going to start getting into it, so I think you are going to see another wave."
Dixon, who said he has a "fair amount" invested in bitcoins, said that tech entrepreneurs have historically struggled to get into the financial tech space because of its massive size and the rigid regulations related to the finance industry. But the anonymous payment network that bitcoin provides helps avoid these obstacles and that has entrepreneurs in Silicon Valley excited, Dixon said.
"I think a reason a lot of people in California are excited about bitcoin is because there is sort of a release valve for now for all this pent-up frustration around financial tech," Dixon said. "Finally, something interesting is happening."
Bitcoins have also become a powerful hedging tool for investors, said Chamath Palihapitiya, the founder and managing partner of the venture firm Social Capital Partnership.
Palihapitiya, who owns bitcoins in his hedge fund and in his private account, said he thinks the digital currency will eventually evolve into a mainstream payment tool and he sees business opportunity in the space, Right now, he said, bitcoins are proving useful as a way to secure assets.
"Bitcoin and things like it are the equivalent of a red pill. We are entering an uncharted world right now," Palihapitiya said Monday at the conference. "It's a huge, huge deal. Because what you are talking about right now is that for the next three to five years it is an unbelievably better store value. It is gold 2.0."
Bitcoins are being used everywhere one would think the digital money would be used to hedge, including Russia, Iran, Iraq, Egypt, Venezuela and Argentina, Palihapitiya said.
"Everywhere you have currency pressure, everywhere you want to basically shield your assets, and after that it will probably become a payment mechanism," he said.