expert briefing - state of bitcoin

2State of Bitcoin 20152 March 2015

4State of Bitcoin 2015

About CoinDesk• World leader in digital currency news, prices and

information• The Bitcoin Price Index serves as an industry reference

point• International team headquartered in London• Editors based in London, New York, San Francisco and Tokyo


The State of Bitcoin?

6

A ‘Tale of Two Bitcoins’?

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way”

-Charles Dickens, A Tale of Two Cities

State of Bitcoin 2015


Contents

• Price• Media• VC Investment• Commerce• Technology• Regulation and

Macro• Conclusion


Price

$0

$200

$400

$600

$800

$1,000

$1,200

From Biggest Annual Price Appreciation in

History…

56X in 2013

2011-13 CAGR of 84,066%

Bitcoin price up

Source: CoinDesk Bitcoin Price Index daily closing price (taken at 00:00 GMT)

9

01/01/2013 01/02/2013 01/03/2013 01/04/2013 1/05/2013 1/06/2013 1/07/2013 1/08/2013 1/09/2013 1/10/2013 1/11/2013 1/12/2013



…to 2014’s Worst Performing Currency

Source: CoinDesk http://www.coindesk.com/price/

-67.4%

http://www.coindesk.com/price/

http://www.coindesk.com/price/


CoinDesk Bitcoin Price Index – 2014 & 2015 YTD by the Numbers

Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTCwww.coindesk.com/price

31st Dec Close $319.702nd Mar $258.88YTD Δ -19.0%2nd Mar Market Cap $3.6bn

2015 YTD Price Summary

High (6th Jan) $951.39Low (30th Dec) $309.872014 Δ -67.4%Average $526.92Median $501.63

2014 Price Summary

http://www.coindesk.com/price


The Bitcoin Startup Ecosystem: Seven Different Bitcoin Company

Categories

12

Payment Processing

Wallets

Mining

Financial Services

Exchanges

Infrastructure

Universal

Source: CoinDesk


Mining and Exchange Sectors Shrink

Source: CoinDesk

Exchange companies go bankrupt

Mining companies go bankrupt

Aquifer LLC


Media


Bitcoin: Never a Shortage of Bad News

15


Q1 Negative News

16

Bitstamp claims $5 million lost in hot wallet hack

Bitcoin mining firm CoinTerra files for chapter 7 bankruptcy

Hong Kong's MyCoin disappears with up to $387 million


Drop in Bitcoin News Coverage in Q1

17

News Published Mentioning Bitcoin

Note: Numbers of stories obtained by searching ‘bitcoin’ on respective publishers’ websites, Q1 2015 number of news coverage calculated by run rateSources: respective publishers’ websites

FT

NYT

WSJ

Sina

0 50 100 150 200 250 300 350 400 450 500

92

67

136

194

41

76

156

235

Q1 2015Q4 2014


Q1 Positive News

18

Coinbase's record $75 million funding round, opening of US regulation compliant exchange

Bitcoin Core 0.10 gives developers simplified network consensus access

Blockchain number of wallets passes 3 million


VC Investment


Total VC Investment in Bitcoin Startups to Date

20

$551m

Source: CoinDesk (www.coindesk.com/bitcoin-venture-capital/)

http://www.coindesk.com/bitcoin-venture-capital/



Eventually mainstream products, companies and industries emerge to commercialize it; its effects become profound; and later, many people wonder why its powerful promise wasn’t more obvious from the start.

What technology am I talking about? Personal computers in 1975, the Internet in 1993, and – I believe – Bitcoin in 2014.

- Marc Andreessen, Andreessen Horowitz

As Big as the PC and Internet?

“”

21


2014 Bitcoin VC Investment Surpassed Early-Stage Internet Investment

22

*Includes first sequence venture deals but excludes late-stage 1995 Internet investments ($257.6m). For additional disclosure on methodology see

www.coindesk.com/following-money-trends-bitcoin-venture-capital-investment/

2013 Bitcoin 2014 Bitcoin 1995 Internet*$0

$50

$100

$150

$200

$250

$300

$350

$95.8

$334.8

$250.1

Bitcoin vs Early Internet VC Investment ($m)

Sources: CoinDesk, PricewaterhouseCoopers

http://www.coindesk.com/following-money-trends-bitcoin-venture-capital-investment/

http://pwc.blogs.com/press_room/a-brief-history-of-pwc.html


Record Setting VC Deals Continue after the Price Collapse

23

$75m

$30.5m (Series A) October 2014 (Series C) Jan 2015

Source: CoinDesk (www.coindesk.com/bitcoin-venture-capital/)




Universals Raised the Most Funding in Q1, Followed by Mining and

Infrastructure

24

Q1 VC Investment by Ecosystem Category (millions)

Sources: CoinDesk (www.coindesk.com/bitcoin-venture-capital/), CrunchBase

0

10

20

30

40

50

60

70

80

$1.1 $1.7 $2.0 $5.0 $6.1

$15.0

$75.0

Payment ProcessorExchangeWalletFinancial ServicesInfrastructureMiningUniversal





Number of Universal Bitcoin Companies Doubled in 2014

25

• Universals operate across more than one aspect of the bitcoin value chain (e.g. Coinplug provides payment processing, wallet and ATMs)

• More and more bitcoin startups continue to pursue the universal model

• Universal bitcoin companies leverage two key elements of financial services: efficiency and trust

The Universals

2013

2014


Commerce


What Do People Buy with Bitcoins? Home Goods & Consumer Electronics

27

Source: most popular items purchased through Purse.io by November 2014

Trashbags Coffee Grinder Infant Formula

Home Goods

Bluetooth SpeakerDigital CameraPlaystation

ConsumerElectronics


Companies Representing >$180 Billion in Annual Revenue Now Accept Bitcoin

28

Top 10 Largest Bitcoin-Accepting Retailers

*Monprix is a private company; most recent revenue data is from 2005. TigerDirect estimate provided by parent company investor relations. Other divisions that are part of a larger parent organization, but do not break out individual divisional revenues, are excluded.

Rank CompanyAnnual Revenue

($bn)1 Microsoft 86.8 2 Dell 56.93 Dish Network 13.94 Expedia 5.05 Intuit 4.56 Monprix* 4.37 Time Inc.** 3.48 NewEgg 2.89 Overstock 1.3

10 TigerDirect* 1.0Total $179.9

**The revenue is Time Inc. FY 2013 revenueSources: CoinDesk, Coinbase, BitPay, companies’ annual reports


>82,000 Merchants Now Accept Bitcoin,

Up From 75,000 in Q3 (+9%)

29

44K 38K

Sources: Coinbase and BitPay

http://www.coinbase.com/

http://www.bitpay.com/


Growth in Bitcoin-Accepting Businesses Slowed Throughout 2014

30

Sources: CoinDesk, Bitcoinity

Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 20140

2,0004,0006,0008,000

10,00012,00014,00016,00018,000

13,903

16,800

12,936

10,360

6,000

Number of New Bitcoin-Accepting Businesses Added Each Quarter

http://bitcoinity.org/markets


Total merchants Forecasted merchants

140,000 Bitcoin-Accepting Merchants Forecast by End of 2015

Sources and notes: total current merchants based on data from Coinbase and BitPay. Historical Coinbase data provided by BitcoinPulse. BitPay historical data between new merchant press release announcements of 10,000 (16th Sep 2013),

20,000 (13th Jan 2014) and 30,000 (28th May 2014), respectively, calculated using linear interpolation.

Nov-13 Feb-14 May-14 Aug-14 Nov-140

10,00020,00030,00040,00050,00060,00070,00080,00090,000

R² = 0.961951114203886


http://www.bitpay.com/

http://www.bitcoinpulse.com/


Well-Funded Bitcoin Startups are Able to Secure Banking

Relationships

32

Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)

$27.5m funding

$10.0m funding

$9.0m funding

$5.0m funding

Reasons banks hesitate on bitcoin:• bigger

risks• higher

costs• more work• Low ROI• regulatory

pressure• prohibited

by regulators



Blockchain Wallet Growth Rate Has Been Flat for Last 12 Months

33

Source and note : Blockchain.info, 2015 quarter one wallet number is calculated by run rate

Sep-2013 Dec-2013 Mar-2014 Jun-2014 Sep-2014 Dec-2014 Mar-20150

100,000

200,000

300,000

400,000

500,000

600,000

120,262

514,583481,258

343,121

480,715451,294 464,919

No. of New Wallets

No. of New Wallets

https://blockchain.info/charts


Total Wallets Forecasted Wallets

Approximately 12 Million Bitcoin Wallets Forecast by End of 2015

34

R2 = 0.971

Sources and notes: total wallets based on data from Blockchain.info, MultiBit, Coinbase, Andreas Schildbach (Android Bitcoin Wallet developer). Historical Coinbase data provided by BitcoinPulse.

Jan-13

Mar-13

May-13

Jul-13

Sep-1

3Nov

-13Jan

-14Mar-

14

May-14

Jul-14

Sep-1

4Nov

-140

1,000,0002,000,0003,000,0004,000,0005,000,0006,000,0007,000,0008,000,0009,000,000

https://blockchain.info/charts

https://multibit.org/


http://www.bitcoinpulse.com/


Bitcoin Remains the Coin of Choice in the Post-Silk Road Online Black

Market

35

• The view that bitcoin would be quickly supplanted by DarkCoin or another theoretically more anonymous altcoin for black market use appears to be unfounded

Source: Wired http://www.wired.com/2014/09/agora-bigger-than-silk-road/

Agora, which is larger than Silk Road 2.0, only accepts bitcoins

http://www.wired.com/2014/09/agora-bigger-than-silk-road/

http://www.wired.com/2014/09/agora-bigger-than-silk-road/


Technology


520 Altcoins, Bitcoin’s Market Cap is 8X Larger Than the Next Biggest

37

Source: CoinMarketCap data as of 27th Feb 2015

Rank Name MarketCap1 Bitcoin $ 3,500,578,6782 Ripple $ 417,883,9643 Litecoin $ 67,896,4964 BitShares $ 27,093,2995 Darkcoin $ 16,441,7426 MaidSafeCoin $ 14,798,3287 Dogecoin $ 14,131,2198 Nxt $ 13,100,8629 Paycoin $ 12,638,054

10 Stellar $ 11,167,006

http://coinmarketcap.com/


Crypto 2.0 Projects to Keep an Eye on in 2015

38

BitAssets – allowing traders to hedge against bitcoin's fluctuations

Alternative blockchain to bitcoin’s

Decentralised social messenger

Bringing smart contracts to market

Source: CoinDesk


CoinBase’s API Gaining Traction With 44 Bitcoin Apps Built on it

39

Source: CoinBase


Regulation and Macro


NY BitLicenses 2.0: Bitcoin Still Being Held to Higher Standard

41

• New York’s BitLicense regulatory proposal widely regarded as a possible framework for other jurisdictions.

• Ben Lawsky announced the latest revisions to the draft BitLicense in mid-December.

• Clarified and narrowed which players in the digital currency industry would be required to obtain a BitLicense.

• Fewer disclosure and record-keeping requirements for transactions.

• The proposed record-keeping requirement for licensees reduced from 10 to seven years.

• Broader range of financial assets (that includes virtual currency) that can be counted towards licensees' capital requirements.

Ben Lawsky

Source: CoinDesk


Bitcoin Startups are Pulling Out of NY

NY’s Ben Lawsky

UK’s George Osborne

New York vs

London

• UK Chancellor George Osborne has announced he is looking to make the UK attractive to bitcoin startups and capital

• Startups like Epiphyte have already relocated from NY to seemingly friendlier London


Light Touch UK Bitcoin Regulation

43

Source: CoinDesk (http://www.coindesk.com/bitcoin-regulation-uk/)

Consumer Protection

HMRC (HM Revenue & Customs) and FCA

Taxation

Prevention of money laundering

Financial Conduct Authority (FCA)

No regulation on digital currencies and no intention of doing so.

No formal obligation from HMRC. But Registering as an MSB brings a firm under the UK's anti-money laundering (AML) regulations.

HMRCVAT on bitcoin purchase withdrawn. HMRC considering how best to tax bitcoin.

http://www.coindesk.com/bitcoin-regulation-uk/


UK-London Based Bitcoin Companies

44

Source: CoinDesk

(News & Analytics)

(Wallet)

(Wallet)

(Exchange)

(Payment Processor) (Exchange)

(Exchange)(Networking)

Illegal

Restricted

Legal


Source: Wikipedia

Bitcoin Regulation Could Be Much Heavier

Will Bitcoin First Gain Traction in Advanced Economies…


… or in the Under-banked Developing World?

Due to lack of credit cards, approximately 65% and 35% of all e-commerce in China and India respectively is conducted with cash

… bitcoin may help it leapfrog credit cards


48

Bitcoin Market Potential Index (BMPI)

• Remittances • Inflation• Technology

penetration • Financial repression

• Bitcoin penetration • Financial crisis – historical

• Black market

‘Positive’ Index Drivers ‘Negative’ Index Drivers


Sub-Saharan Africa is the Most Fertile Region for Bitcoin, Followed by Latin America & Post-Soviet

49

BMPI Regional Distribution -

Top 30

BMPI Regional Distribution - Top 10

Europe 10%Middle East

& North Africa 10%

Latin America

20%

US & Canada 10%

Sub-Sa-haran Africa 40%

Post-Soviet/Communist 10% Asia 7% Europe

3%Middle East & North Africa 13%

Latin America

17%US &

Canada 3%

Sub-Sa-haran Africa 40%

Post-So-viet/Com-

munist 17%


The BMPI Top 10

50

Rank Country 1Argentina2Venezuela3Zimbabwe4Malawi5United States6Belarus 7Nigeria 8Congo (DR) 9Iceland10 Iran

Cristina Fernández de Kirchner’s Argentina is #1


BMPI Interactive Heat Map located at:

51

BitcoinIQ.info


http://www.bitcoiniq.info/

State of Bitcoin 2015 52

Conclusion


A ‘Tale of Two Bitcoins’

53


Type Historical Contemporary

Dig

ital

Phys

ical Intrinsic

value

Token

ClosedCentralized

OpenDecentralized N/A

Source: Hileman (2013) ‘History and Prospects for Alternative Currencies’, London School of Economics working paper

Bitcoin is Unlike Any Previous Alternative Currency

54


Investments in FinTech Dwarf Bitcoin

55

BitcoinFinTech

Sources: CoinDesk, Medium (https://medium.com/@UnitedVentures/fintech-key-trends-2014-5124b6088677)

FinTech$3b invested in 2014

$0.3b invested in

2014

100 Deals

Biggest Deal

$31m

216Deals

Biggest Deal

$150M

https://medium.com/@UnitedVentures/fintech-key-trends-2014-5124b6088677


FinTech Investment Continues Growing

56

Sources: CoinDesk, Medium (https://medium.com/@UnitedVentures/fintech-key-trends-2014-5124b6088677)

https://medium.com/@UnitedVentures/fintech-key-trends-2014-5124b6088677

Thank you

@GarrickHileman


expert briefing - state of bitcoin

Economy & Finance