Venture Capitalist Tim Draper has some interesting opinions about the future of the financial industry. In an interview with Bloomberg TV today, the investor said that the smart bet in the tech industry was bitcoin, an idea that will spark heated debate in the wake of recent problems with the cryptocurrency.

Bitcoins

Draper, who is Managing director at Draper Fisher Jurvetson, has been in the headlines for odd ideas a couple of times recently. He was one of the leading voices behind a proposal to divide California into six separate states because of its burgeoning population. Now he’s pushing the bitcoin trade, and that idea is bound to be just as controversial.

Bitcoin could transform the world

Draper told Bloomberg TV that he believes that cryptocurrencies have the potential to change the world by leaps the size of those brought on by the internet. That kind of transformative power is not found all that easily, and if Draper is right there’s be a huge amount of money to be made in the business. Several high-profile investors have jumped into the market, and Draper admits that his own son is involved with start-ups in the area.

Draper told Bloomberg that he himself holds bitcoin as part of his portfolio, and he is also invested in a number of companies who deal with the cryptocurrency. Real investors are putting big money into startups that could multiply their value if bitcoin use becomes widespread. Whether or not the alternative investment is the smart bet in tech will only be tested in time, but its certainly not an area for the risk averse investor to plow into.

Bitcoin controversy will not kill dream

Draper addressed the problems that bitcoin has had to deal with so far. The effect of the currency’s involvement in illicit trades on Silk Road and similar sites is discounted, according to Draper, by the similar stigma attached to the internet in its early days.

The transformative potential of cryptocurrencies is really not in question. What is difficult to predict, however, is whether or not regulators will allow them to take hold. States tend to jealously guard every power they have, so the decline of State-licensed money is unlikely to be sanctioned by regulators. Draper says that despite its weaknesses bitcoin is still less volatile than the currency in places like Argentina, an attribute that could see electronic alternatives become common in those countries.

Bitcoin is dangerous to the wallets of ordinary investors, and not because of any threat it poses to the Federal Reserve system. Despite its disruptive power, the cryptocurrency is far too volatile to form a store of value, and the industry, despite being sold well by a lot of venture capitalists, has shown little evidence of success.