Reflections on Bitcoin – 10: State of Bitcoin

Posted by John Patrick on

Bitcoins in a Jar

Bitcoin continues to gain momentum. CoinDesk, a global news source for Bitcoin happenings, presented it’s State of Bitcoin Q2 2014 on July 10 at the CoinSummit in London. There are a number of highlights to their report. Bitcoin price has back come back 39% from the end of Q1. The number of stories mentioning Bitcoin in the mainstream media Rose 439%. The all-time bitcoin VC investment has reached $240 million. There are now approximately 63,000 businesses that except Bitcoin and 5.3 million digital wallets exist to pay for things. Larger and more established consumer brands are adopting bitcoin; e.g. Dish, Expedia, Newegg, 1800flowers.com, and others.

Bitcoin now represents 93.4% of total cryptocurrency market cap. Some pundits believe that cryptocurrency is going to take hold, but bitcoin may not be the major player. As written here before, the grass roots is hard to beat, and with 93.4% of the capitalization, it seems clear to me that bitcoin will be the winner, even if there maybe some technically superior alternatives available.

Bitcoin has the potential to disrupt numerous financial services including payment processing, title insurance, deposits, exchange trading, withdrawal and overdraft, escrow, foreign exchange, trust management, float, collections, transfers and wires, and notary. The total revenue of these services exceeds $3 trillion and the market cap of the companies that provide those services is more than a half-trillion. I see major disruptions ahead.

Venture capitalists see significant upside investing in bitcoin. One example is bit pay, which has received $30 million of financing. Here is why: bitpay has more than 30,000 total merchants. As of the beginning of 2014, they were adding more than 1,000 merchants to their network each week and processing $1 million in bitcoin payments every day. During 2013, they processed more than $100 million in Bitcoin payments.

The total venture capital investment in crypto currency startups to date is $240 million. This is approximately equal to the 1995 investment in Internet startups. Developers see bitcoin as a big opportunity also. There are now approximately 340 bitcoin apps for iOS and 250 for Android. The open question is who will dominate the enterprise-level infrastructure for the financial services industry. Will it be IBM, Microsoft, Amazon, or Oracle? Or, will it be Coinbase, Circle, coinplug, or some other startup that most of us have never heard of?

As written here before, I believe some level of regulation for bitcoin would be a good thing. I get flamed every time I say that, but I am quite sure that it is necessary. The second-quarter bitcoin report from CoinDesk says that the regulatory environment is stabilizing and trending toward the positive. Bolivia made Bitcoin illegal in May, while Chinese regulation has slowed, and California legalized Bitcoin in June. I am optimistic.

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