As mentioned in my previous post, 2014 has been a good year for the infrastructure of Bitcoin. The fundamentals are still sound and people are still confident about the success of this technology. The price has dropped during 2014 but this was needed as the price was far too obscene when it went above the $1000 mark in late 2013 and the price over took the true value of the then young network and infrastructure.
Bitcoin has stabilised and could be ready for the next bull run. The price is continually fluctuating at extremes as this is a new technology and a new currency and the price is finding its true market value. Bitcoins current value is based on speculation but this shall pass as Bitcoin becomes useful to more people. This includes institutional investors, businesses and everyday consumers. When Bitcoin stops going through this exponential growth period so too shall the price stabilise. Where this true price settles is to be seen, but it is safe to say that Bitcoin has a lot of current and future potential and its current market cap of £2.5 billion is nothing compared to what it could be for a truly global payments network.
I have mentioned previously that we need more mainstream adoption and for this to happen we need more services and products that help to propel and justify the use of Bitcoin to the masses. Only then will we see the price stabilise and this could take many years! maybe even a decade or more. First of all we need more investment and funding in to Bitcoin start ups and companies, which we are seeing today. In 2013 there was roughly $100 million dollars of investment in Bitcoin companies, in 2014 there was roughly $400 million dollars, and as of writing in January 2015 there has already been $75 million invested in Coinbase alone. That is investment in just one Bitcoin company in January alone!
It is this sort of funding that shall allow for the creation and improvement of new services. This in turn will lead to a change in perception about Bitcoin in the eyes of regulators, institutions, big businesses and finally the mass market. Notably those investing in Coinbase are the New York Stock Exchange and ex Citigroup CEO Vikram Pandit. We are seeing notable people who work in finance finally investing in to Bitcoin companies. Eventually we will see a mass entry of financial services investing in to Bitcoin and Bitcoin services which in turn shall help to develop and nurture Bitcoin in to a more practical solution for all. This is when we shall finally see the entry of everyday people using and adopting Bitcoin.
The next step of adoption has began with financial institutions and investors entering the Bitcoin scene. We have moved beyond the first adoption phase by computer hobbyists, then the second phase fuelled by novice speculators and we are now entering a third phase where financial institutions and investors are entering the stage. Gone are the days of sending your money to a shady exchange in Eastern Europe or Japan if you want to buy large amounts of Bitcoin.
Coinbase has money transmitter licences in 25 US states, a good track record for security and $106 million dollars in VC funding by some big and reputable names. Also note worthy are the Winklevoss Brothers who are to launch a Bitcoin exchange-traded fund (ETF) and also a regulated US based Bitcoin exchange called ‘Gemini’. With this credibility moving in to the Bitcoin market we are soon to enter the next stage of adoption and price increase as the market re-evaluates the value of Bitcoin as a result of this new found trust. Bitcoin is finally growing up to its adolescent point.