Digital currencies have properties that can add value when used instead-of or in-addition-to traditional currencies.
This week there are teams of entrepreneurs headed to the annual SXSW conference and are hatching ideas and building software while enroute.
Each of the six Startup Buses hold 25 entrepreneurs in which teams form. Over several days the teams create startups to be pitched to investors upon arrival in Austin.
It appears that none of these startup teams have considered leveraging a digital currency as a competitive advantage for their strategy.
There are multiple startup teams onboard whose ideas would benefit by incorporating Bitcoin currency:
The Startup Bus organization itself does grasp the concept. They’ve offered a virtual stock exchange (note - includes our referral link) enabling participants to invest virtual currency dollars into the different startup companies. The virtual currency has no value outside the exchange however. Maybe for next year’s event their virtual stock exchange will instead be offered with a digital currency where real money is invested.
Wouldn’t a better approach be where, that by the time Austin’s city limits are reached, the winner is already funded?
More info about The Startup Bus:
Ryan make his case for why now is the best time to get started on a Bitcoin startup or to incorporate Bitcoin into your existing business:
“By next year, all the easiest, obvious businesses will be taken”.
The list of merchants accepting bitcoin has been growing yet it just scratches the surface of the potential opportunities that a digital currency creates.
A few ideas for businesses that could be built can be found, ironically, in a thread on one of the first Bitcoin startups, witcoin.
Bitcoin Revisited On This Week In Startups #150
Jason Calacanis (@Jason) isn’t surprised by the actions taken by Senators Schumer and Manchin. He discusses this with guests Andrew Warner (@AndrewWarner) of Mixergy and James Altucher (@jaltucher) on TWiST150. Discussion begins at about 14:50 into the show. Bitcoin lead developer Gavin Andressen and Amir Taaki were interviewed by Jason on TWiST140.
Camp BX will let its users short-sell Bitcoins, which will help stabilize the volatility for the young currency. Today, an 8 percent swing in the value of the Bitcoin throughout the day is pretty typical.
The number of Bitcoins available to users is algorithmically limited — meaning the number of new Bitcoins introduced into the economy decreases over time [and even] smaller moves in the market are able to cause greater swings in the value of the Bitcoin.
“There isn’t really anywhere that’s the ‘Place for Bitcoin,’ and that’s what we hope to be,” Vessenes said this week.
CoinLab already has its first project, dubbed Bitsent, for sending Bitcoin via text message. Their sites promises “a lot more in the works.”
One of the first U.S.-based Bitcoin exchanges, ExchB, has closed. The notice on the exchange’s site is quick to reassure its customers that all funds are available for immediate withdrawal. The reason for the closure was stated simply as:
The cost in time and money of running ExchB and the funds required to take it to the next level will exceed our available resources.
Though there are many other exchanges, ExchB had been unique in that it was the only exchange in the U.S. with a “cash deposit” method at thousands of branches of bank branches in the U.S.. Coincidentally, Mt. Gox recently has added a cash deposit option through Chase bank though this option requires that certain verification steps are performed prior to the first deposit.
Another service offered by ExchB was the ability to withdraw USD funds as an ACH withdrawal transaction (also referred to as direct deposit). This option was among the fastest method for those in the U.S. to see proceeds from the bitcoin trades hit their bank account. A similar ACH withdrawal capability is offered from other exchanges though the financial intermediary Dwolla,
Though trading volumes at ExchB had been on the rise, the drop in the Bitcoin exchange rate has significantly dampened interest in the currency for speculative and investment purposes. Those performing arbitrage to take advantage of market price differences between exchanges though would often find that bitcoins could be sold through ExchB at levels above those at other exchanges. This was likely due to the amount of volume for the exchange’s cash deposit funding method.
In the months since ExchB launched (initially as ExchangeBitconis.com before rebranding as ExchB) they had survived a number of external challenges including payment reversals following a change by Dwolla. That the exchange’s shutdown is graceful is almost noteworthy though the requirement that all funds in customer accounts be withdrawn by October 24, 2011 might be a point of contention for some who did not learn of the deadline early enough.
Bitcoin Ends January Up 51%, Largest Monthly Increase Since 2011
For the month of January, 2013 the closing price of $20.41 USD was up nearly seven dollars from the 2012 year-end close resulting in more than a 51% increase for the month — Bitcoin’s largest monthly gain since December 2011. The one-year gain, calculated from the January 2012 close of $5.48 is whopping 272% and is illustrated in this chart of month-end closing prices:
January was a good month for other assets including stocks, the precious metal silver, and WTI crude. However not only did Bitcoin trounce them for January 2013, it dominated over them throughout much of 2012 as well:
The 111,100 bitcoins issued which Bitcoin miners took in during the month is valued at $1.72 million using the average daily valuation for the month of $15.49. Miners had been suffering ever since the block reward subsidy “halving” that occurred in November last year. With this spike in the exchange rate mining profitability for GPU miners is again at respectable levels, However that will soon change again now that there is at least one ASIC mining hardware manufacturer that has begun shipping.
Mining results will vary based on the Bitcoin mining difficulty, with automatic periodic adjustments that re-calibrate production so that it resumes at the targeted rate. The biggest adjustment to difficulty in 2012 was under 15% and at the end-of-year the difficulty was not even three times the level it was at when the year started. ASICs have the potential to do that same level of an increase (tripling) in just a matter of a couple months. A dollar’s worth of ASIC hardware performs hashing at the rate that is nearly two orders of magnitude over what a dollar’s worth of GPU hardware does so we are likely just a couple months (or less) away from seeing the end of any GPU mining that is profitable.
The total value of all bitcoins issued as-of the end of January (a metric that some refer to as Bitcoin’s “market cap”) is a number just under $220 milliion USD, more than $75 million greater than where it started at for the month. Certainly greater demand occurring due to Bitcoin gaining traction as a payments and money transfer system is partly responsible for a higher valuation but there appeared to be no massive jump that would account for the need for an additional $75 million worth of the currency. Thus a significant portion of the rise can only be attributed to speculative interest.
An attempt to quantify how much of a valuation rise was necessary to accommodate the rise in the use of bitcoin for transactions would require reliable data on the behavior of consumers who use bitcoins. Those procuring bitcoins for use in money transfer or for paying for purchases do impact the monetary velocity of the currency in a way much different from how those who are acquiring bitcoins for long term investment or for short term speculation even.
If this velocity metric has been studied, the results have not been shared publicly. What is shared publicly is transaction data that crosses the Bitcoin network. However since that data is both pseudonymous and includes indistinguishable “change transactions” which are sent back to the party making the payment, very little information about Bitcoin’s economy can be reliably gleened from it.
Most bitcoin market exchanges provide feeds with trading results in real-time and many volume records were broken in January. Additionally, several bitcoin-related companies have started sharing their results. The numbers coming out include BitPay’s announcement of having processed 10,000 transactions cumulatively from their 2011 launch through mid-January. Other metrics include impressive volume and growth numbers coming from online casinos — the first industry that cannot ignore Bitcoin.
Early in January Bitcoin Foundation executive director Peter Vessenes published his Quarterly Update in which he describes an increasing level of interest from investors and shared his prediction that in 2013 there would be Bitcoin “liquidity problems” (price increases).
With Bitcoin trading markets only having existed for a few years there isn’t enough data to conclude that there is a seasonal trading pattern. In 2012 the exchange rate dropped in February after a strong couple of months prior but then stayed level for a few months after that.
Those buying or holding bitcoins are trusting that Bitcoin’s current scalability problems are about to be resolved, that its exchanges are handling security better (the successful January hack against VirCurEx barely slowed them down), and that Bitcoin will not immediately see intervention by governments (being completely ignored by them is probably a temporary, one-time bonus).
But Bitcoin remains an experimental currency. As the software gets poked and prodded, new vulnerabilities are discovered. Some vulnerabilities will result in funds being lost while others — initially appearing to be quite scary will receive further analysis and be found to be inert. But most bitcoin users and investors and aren’t going to be monitoring chat channels or forum threads to determine if an event has occurred in which selling some coins would be a wise move.
Yet tremendous upside may remain that could be overshadowing the risks. Payments startups like Square, Stripe, Braintree, Dwolla and mFoundry aren’t publicly traded so their shareholders mostly consist of angels and venture capital investors. When any of these startups hits a “home run” (their product succeeds tremendously, or the organization is acquired, or they go public) it is the founders and shareholders who enjoy the tremendous financial gains. When a SatoshiDICE, BitInstant, CoinBase, or BitPay (all angel- and venture capital-backed Bitcoin-related startups) hits a home run, every person holding a bitcoin likely sees a rising valuation due to the increased demand for Bitcoin as a currency resulting from that startup’s success.
Bitcoin speculators also could benefit from another characteristic of the nascent digital currency. Without Wall Street’s participation there are few affordable methods to take a short position or to perform price hedging. Without this relief valve, wild volatility occurs as the market tries to discover Bitcoin’s price. It could go high, “really high” explains Trace Mayer of RunToGold.com.
With the last edit before publishing this monthly summary being composed nearly a week into the month of February and the exchange rate continuing to rise past the January close, there could be much more left to this rally.
I am excited about Bitcoin. It’s exciting to watch a global digital currency get traction.
The primary advantages of Bitcoin are:
- Speed and price. You can transfer money anywhere in the…
[Original: http://adamdraper.com/post/44563343164 ]