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Bitcoin trends in Q1 2015

Greetings Bitwagers!

Hope you have been having a great past couple weeks, because we sure have been busy with some exciting new partnerships just over the horizon. Speaking of which, we just approved our first batch of international debit cards. If you have not been approved, make sure that you have completed the signup process with your Xapo account. Also make sure to check your spam folders for the Bitwage/Xapo debit card invite.

Regulation

A “Virtual Currency” regulations bill has been proposed in the California legislature. Similar to the controversial BitLicense of New York, the bill would result in significant hurdles for California Bitcoin startups to get off the ground and/or pivot their business model. Each startup staying in California that does not fall into an exempt category would have to pay a $5000 application fee and submit a detailed business plan to a Commissioner at the Department of Business Oversight. The bill is also vague enough that an individual Californian “in the business of virtual currency” would fall under its jurisdiction. Although the bill is still in the proposal stage as of April 2015, you might want to contact the California Assembly Member Matt Dababneh, who introduced the bill, as well as consider adding your name to an online petition started by John Light, whose Buttonwood SF weekly meetup would be affected, as would be local Bitcoin seller or buyers.

Q1 2015 Bitcoin Trends

The Bitcoin industry stats for the 1st quarter of 2015 are in. Although all parts of the ecosystem are still growing, especially VC investments, we would like to acknowledge that some parts are not growing as fast as they were in 2014, namely the mining hash rate and the pace of individual merchant adoption, even as more and more established payment processors integrate Bitcoin payments as an option for merchants. We think this switch from exponential to linear growth is a sign of the industry maturing.

The cooling off (no pun intended) of the mining industry is easily explained by the price of Bitcoin declining in early 2015. Like any efficient market, the mining scene is so competitive that a typical miner just breaks even on the cost of hardware and electricity by selling the mined bitcoin, given a steady price. Early miners earned windfall profits as the price grew exponentially. But with the recent price “halving” from $400s to $200s, only the most efficient miners – those with access to the latest and greatest mining rigs and/or cheapest electricity could afford to keep mining. Despite this shaking out, the hashrate has kept growing and we still think the Bitcoin network is still relatively safe from a 51% attack or the like, as it’s still over 100x more powerful than all of Google’s servers combined.

As for new merchant adoption, it seems like the Bitcoin enthusiasts and visionaries among them (like Patrick Byrne of Overstock) have already started to proudly accept Bitcoin over a year ago, while other merchants aren’t impressed by the sales volume from Bitcoin retail transactions, and so aren’t rushing to set up BTC acceptance themselves until there is more demand from consumers. In developing nations, however, where credit card adoption is low, yet chargeback / fraud rate is high, Bitcoin payments can make a difference between e-commerce and cash-only commerce. Now the challenge is education and adoption of Bitcon by consumers in those developing nations.

In addition to countless startups and a few corporations investing employee time to Bitcoin research, VC investment has been growing nicely. The most notable example is 21 Inc, which raised over $100 million while its Bitcoin product or service is yet to be announced. However, it takes months or years before investments of money, talent, dedication and collaboration yield returns and spur innovation and growth (and hopefully a financial return for the corporation or the VC, so they can re-invest). We ain’t seen nothing yet.

Although we are not fixated on the price of Bitcoin, solutions like our Bitcoin payroll are starting to “close the loop” – a point made by Balaji Srinivasan of 21 Inc at the recent Bitcoin job fair in Sunnyvale. While most big announcements in the community are great, the bulk of them represent an increase of selling pressure. As we continue to grow, our solution applies upward moving buying pressure, helping the ecosystem as a whole.

Until next time, stay classy Bitwagers.

-Team Bitwagers

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