Christopher Flowers: Most Bitcoin Startups Will Fail

The Bitcoin community hopes that the digital currency will one day become the global currency of choice. However, this may not happen in the short term. First, Bitcoin still has a long way to go in terms of both its scope of application and technological development. Although it sounds a bit far-fetched, Bitcoin will eventually reach this point.

J. Christopher Flowers, a veteran financial services investor, has a different view. According to him, in this financial technology revolution that is all around us, most startups will not end well. At the Super High Return Private Equity Conference in Berlin, he mentioned that most selective financial services startups are using Bitcoin to provide services to companies that are not satisfied with the mainstream banking sector. This may lead to companies making bad lending decisions, and in the long run these companies may suffer huge losses due to defaults.

Despite Flowers' confidence in the established traditional banking system, he seems to overlook the fact that banks already feel threatened by the growth of the Bitcoin industry. The banking industry is trying to combat the growth of the Bitcoin industry by integrating the technology used by Bitcoin into its operations. The banking model is not perfect, as has been proven by the recession of the past decade. The large banks that are too big to fail have had to close their doors or get a bailout from the Federal Reserve.

Additionally, Flowers states that some fintech startups will be wildly successful and others will fail. He is not saying anything new. There is enough data to prove that the failure rate in the startup ecosystem is quite high. Only 10% of startups survive, and only 10% of those that survive are wildly successful. So, statistically, it is likely that a large number of financial startups will fail and only a few will be wildly successful. The banking sector has learned from their mistakes during the recession and is now very cautious about the debt they accumulate.

Without a proper way to filter bad debts, new-age bitcoin fintech startups will perish as bad loans pile up. A weaker yuan and uncertainty over the euro could make the situation worse.

The point of his speech was that Bitcoin financial technology startups must be more cautious in lending and reduce risks through proper due diligence. Rapid expansion of company services without thinking can backfire and cause huge losses. If Bitcoin startups providing financial services want to fulfill their promises and still make a profit, they must seriously consider Flowers's views and calculate the risks.

Original article: http://www.newsbtc.com/2016/03/01/j-christopher-flowers-startups-fail/
Author: Gautham
Compiled by: Kyle
Source (translation): Babbitt Information (http://www.8btc.com/christopher-flowers-bitcoin-startups-fail)