Venture Capitalists Are Investing in Bitcoin at the Fastest Pace to Date

Venture capitalists are stepping up the pace at which they are investing in Bitcoin, a powerful sign that the digital currency is on track to fulfill its promise of being the most innovative and disruptive force since the Internet.

According to a running tally on the CoinDesk website, venture capital Bitcoin investments in May alone totaled $56 million, which was nearly as much as the 2014 total through the first four months, $57.24 million.

And just today (Monday), Bitcoin security startup BitGo announced it had raised $12 million in Series A financing from Redpoint Ventures.

That puts the year-to-date venture capital Bitcoin investment figure at $125.24 million. If investing in Bitcoin maintains the current pace, total investments will eclipse $250 million for the year.

Some may be tempted to dismiss $250 million as insignificant, given that venture capital investments totaled $29.4 billion last year, according to PricewaterhouseCoopers.

But what's key here is the rapid acceleration.

A total of $250 million would be nearly three times the Bitcoin investments from venture capitalists in 2013.

"We're still in the very early innings of the bitcoin industry as a whole. If you compare it to the Internet industry, we're probably back in 1995 or 1996 and right now it's all about infrastructure," Pamir Gelenbe, a venture partner at Hummingbird Ventures, told MarketWatch.

In fact, $250 million is about equal to the first-sequence venture capital investments made in Internet-based startups in 1995. (Almost all the investments in Bitcoin startups to date have been early round.)

This is a point that Marc Andreessen, one of the co-founders of venture capital firm Andreessen Horowitz, has made often. Andreessen Horowitz has already invested $50 million in Bitcoin startups and is intent on investing "hundreds of millions" more.

"In 1994, as a venture capital firm, it would have been a good idea to take the Internet seriously and it would have been a good idea to invest in a cross section of [Internet] companies […] the venture firms that did do that did extremely well," Andreessen said at a Bitcoin event in March.

Of course, not everyone is convinced. It's not hard to find opinions on Bitcoin that deride the digital currency as a bubble or worse, a scam.

So what are venture capitalists seeing that has convinced them to pour ever-increasing amounts of money into Bitcoin? Take a look…

David Zeiler

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Dave has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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