Expert Briefing - State of Bitcoin

State of Bitcoin 2015 22 March 2015

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4State of Bitcoin 2015


The State of Bitcoin?

A ‘Tale of Two Bitcoins’?

6

“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…

56Xin 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

10

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


-67.4%

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 UTC

www.coindesk.com/price

31st Dec Close $319.70

2nd Mar $258.88

YTD Δ -19.0%

2nd Mar Market Cap $3.6bn

2015 YTD Price Summary

High (6th Jan) $951.39

Low (30th Dec) $309.87

2014 Δ -67.4%

Average $526.92

Median $501.63

2014 Price Summary

http://www.coindesk.com/price

The Bitcoin Startup Ecosystem:

Seven Different Bitcoin Company Categories


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


Q1 Negative News


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


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

92

67

136

194

41

76

156

235

0 100 200 300 400 500

FT

NYT

WSJ

Sina

Q1 2015

Q4 2014

Q1 Positive News


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?

“

”


2014 Bitcoin VC Investment Surpassed

Early-Stage Internet Investment


*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/

$95.8

$334.8

$250.1

$0

$50

$100

$150

$200

$250

$300

$350

2013 Bitcoin 2014 Bitcoin 1995 Internet*

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


$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


Q1 VC Investment by Ecosystem Category (millions)

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

$1.1 $1.7 $2.0 $5.0 $6.1

$15.0

$75.0

0

10

20

30

40

50

60

70

80

Payment Processor

Exchange

Wallet

Financial Services

Infrastructure

Mining

Universal


Number of Universal Bitcoin Companies

Doubled in 2014


• 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


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

Trashbags Coffee Grinder Infant Formula

Home

Goods

Bluetooth SpeakerDigital CameraPlaystation

Consumer

Electronics

Companies Representing >$180 Billion in

Annual Revenue Now Accept Bitcoin


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 Company Annual Revenue ($bn)

1 Microsoft 86.8

2 Dell 56.9

3 Dish Network 13.9

4 Expedia 5.0

5 Intuit 4.5

6 Monprix* 4.3

7 Time Inc.** 3.4

8 NewEgg 2.8

9 Overstock 1.3

10 TigerDirect* 1.0

Total $179.9

**The revenue is Time Inc. FY 2013 revenue

Sources: CoinDesk, Coinbase, BitPay, companies’ annual reports

>82,000 Merchants Now Accept Bitcoin,

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


44K 38KSources: Coinbase and BitPay

http://www.coinbase.com

http://www.bitpay.com

Growth in Bitcoin-Accepting Businesses

Slowed Throughout 2014


Sources: CoinDesk, Bitcoinity

13,903

16,800

12,936

10,360

6,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

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.

R² = 0.962

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000


http://www.bitpay.com

http://www.bitcoinpulse.com

Well-Funded Bitcoin Startups are Able

to Secure Banking Relationships


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


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

120

515

481

343

481

451465

0

100

200

300

400

500

600

Sep-2013 Dec-2013 Mar-2014 Jun-2014 Sep-2014 Dec-2014 Mar-2015

Th

ou

sa

nd

s 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


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.

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Se

p-1

3

No

v-1

3

Ja

n-1

4

Ma

r-1

4

Ma

y-1

4

Ju

l-1

4

Se

p-1

4

No

v-1

4

Ja

n-1

5

Ma

r-1

5

Ma

y-1

5

Ju

l-1

5

Sep-1

5

No

v-1

5

Ja

n-1

6

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


• 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/


Technology

520 Altcoins, Bitcoin’s Market Cap is 8X Larger

Than the Next Biggest


Source: CoinMarketCap data as of 27th Feb 2015

Rank Name MarketCap

1 Bitcoin $ 3,500,578,678

2 Ripple $ 417,883,964

3 Litecoin $ 67,896,496

4 BitShares $ 27,093,299

5 Darkcoin $ 16,441,742

6 MaidSafeCoin $ 14,798,328

7 Dogecoin $ 14,131,219

8 Nxt $ 13,100,862

9 Paycoin $ 12,638,054

10 Stellar $ 11,167,006

http://coinmarketcap.com/

Crypto 2.0 Projects to Keep an Eye on

in 2015


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


Source: CoinBase


Regulation and Macro

NY BitLicenses 2.0: Bitcoin Still Being

Held to Higher Standard


• 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


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


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


Bitcoin Market Potential Index (BMPI)

48

• 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

Asia 0%

Europe 10%

Middle East & North

Africa 10%

Latin America

20%

US & Canada

10%

Sub-Saharan

Africa 40%

Post-Soviet/Communist 10% Asia

7%

Europe 3%

Middle East & North

Africa 13%

Latin America

17%

US & Canada 3%

Sub-Saharan

Africa 40%

Post-Soviet/Communist 17%


The BMPI Top 10

50

Rank Country

1 Argentina

2 Venezuela

3 Zimbabwe

4 Malawi

5 United States

6 Belarus

7 Nigeria

8 Congo (DR)

9 Iceland

10 Iran Cristina Fernández de Kirchner’s Argentina is #1


BMPI Interactive Heat Map located at:

51

BitcoinIQ.info


http://www.bitcoiniq.info


Conclusion

A ‘Tale of Two Bitcoins’


Type Historical Contemporary

Dig

ita

lP

hysic

al Intrinsic

value

Token

Closed

Centralized

Open

Decentralized N/A

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

working paper

Bitcoin is Unlike Any Previous

Alternative Currency


Investments in FinTech Dwarf Bitcoin


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


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

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

Thank you

@GarrickHileman


Economy & Finance

Expert Briefing - State of Bitcoin