[THE INVESTOR] Following bitcoin’s latest meteoric rally, industry experts warned that the speculative bubble could burst anytime, emphasizing to focus on its core technology rather than trading price, at a cryptocurrency and blockchain conference during the SparkLabs Demoday in Seoul on Dec. 7. 

“It’s the nature of anything that involves a network effect. There is always going to be bubble, big highs and big lows. The important thing is not to panic, because the fundamental technology is still there and is still interesting,” said Brian Tubergen, co-founder of CoinList, San Francisco-based platform that manages initial coin offerings. “There will be a bubble that bursts, but in the long term, there is a lot of value.”

The escalating price has enticed many to jump into cryptocurrency trading, experts agreed, but they should focus on its underlying technology and innovation going forward. 

At the time of reporting, the price of bitcoin soared to US$16,000, up by more than 50 percent in just one week. 

SparkChain Crypto Conference at SparkLabs Demoday.

“People need to stop caring too much about the price and take the time to study its technology,” said Joyce Kim, co-founder of Stellar who now leads SparkChain Capital’s US$100 million cryptocurrency fund. “The price is what attracted people globally, but it really shouldn’t stop there.”

For this reason, SparkChain Capital, a venture capital firm launched in October by SparkLabs Group, focuses on investing in protocol layers, the underlying rule of the blockchain network such as bitcoin and ethereum, in comparison to app layers, according to Kim. 

This is different from the internet era where the app layers such as Google, Facebook grabbed the most financial value, instead of protocol layers, such as TCP/IP and HTTP that the apps ran on. 

“There are so much tension going on in just the trading application that we are overlooking the beautiful core technology, where different applications and services could be built on top of that,” she said, adding protocol investments, however, should be limited to ones that are already established. 

On the contrary, Elliot Han, managing director from Argon Group, Los Angeles-based investment bank with cryptocurrency focus, has set his sights on the app-based value. 

“From an institutional investor’s perspective, we don’t have the technological expertise and background to understand protocols frankly,” said Han. “But the beauty of the app-layer is that there potentially is a daily application of it, allowing individuals to understand it and explain to others. That’s a classic case why you shouldn’t invest in what you don’t understand.”

As for the regulatory side, experts raised concerns that heavily regulating cryptocurrency trading, what Korea is moving to do, could not only drive out innovation but also give a boost to the illegal landscape. 

“I don’t think harsh government regulations will fix problems,” said Kim. “These protocols, for better or worse, are unstoppable now and they are just going to go forward. In that case, as a government you have a choice. Make it illegal and push it to the deep underground or take the open, learning policy that is smart and thoughtful about technological development and the one that brings sunlight to transparency. So we can keep good players in the market.”

Tubergen believes the cross-border nature of cryptocurrency makes it difficult to control the industry by imposing tightened regulations. 

“If US decides to heavily regulate ICOs, there is really nothing stopping these companies from going overseas,” he said. “Due to the decentralized nature of blockchain and the ways how ICOs run, it is very easy for companies to go overseas to conduct their fundraising.”

By Ahn Sung-mi (sahn@heraldcorp.com)