Last year's Bitcoin price decline has persisted into 2015, but don't mistake that as a sign the digital currency is dying.
Because even as the Bitcoin price has fallen from a 2014 high of $951.39 to a low this year of $257.09, the Bitcoin ecosystem has continued to grow.
Bitcoin's critics, however, have pounced on the cryptocurrency's latest woes."The scam-ridden world of Bitcoin ... seems to be fast descending into a blazing fireball of financial chaos, bankruptcy, and despair," wrote Izabella Kaminska of the Financial Times.
Just one day after the Bitcoin price sunk below $300 on Jan. 3 - a level not seen since November of 2013 - Bitcoin exchange BitStamp reported it was hacked.
BitStamp said it lost 19,000 bitcoins, or more than $5.4 million at the current price of about $285. Trading was suspended for several days, and still had not resumed as of Friday afternoon.
While not as dominant as the failed Mt. Gox exchange, Slovenia-based BitStamp is one of the oldest Bitcoin exchanges. It plays a key role in the Bitcoin community.
While just a small part of the Bitcoin exchange's total reserves, the incident put another dent in Bitcoin's reputation.
It also didn't help the Bitcoin price slump. But that started before the BitStamp hack, and for no obvious reason.
But the months-long fall in Bitcoin prices and string of bad news has done little to slow the digital currency's progress. That's because the people most involved in Bitcoin see its value as a new technology, not just a new kind of money.
"The price of BTC has very little to do with the level of creativity of thinking that's going into new Bitcoin apps, or their usefulness," Bitcoin evangelist and venture capitalist Marc Andreessen tweeted Jan. 5.
The rate of Bitcoin adoption in recent months has accelerated...
Falling Bitcoin Prices Have Not Slowed Investment or Adoption
CoinDesk's quarterly report on Bitcoin, released earlier this week, shows these points of healthy growth across the Bitcoin ecosystem...
In fact, the Bitcoin price was the only major negative.
Take venture capital, for instance. Venture capitalist investment in Bitcoin reached $334.8 million in 2014, more than triple the $95.8 million of 2013.
And the rate of investment continued to accelerate in the fourth quarter. The $129.8 million invested in Bitcoin startups was an increase of 43% over the previous quarter.
Even if Bitcoin investment levels off at $130 million per quarter, the $520 million total for 2015 would be 55.3% higher than last year's.
The number of merchants accepting Bitcoin also rose in the fourth quarter, from 76,000 to 82,000. Several of those were big household names, such as Microsoft Corp. (Nasdaq: MSFT) and Time Inc. (NYSE: TIME).
And the amount of Bitcoin consumers spent with merchants soared 109% to $180 million.
That reflected an overall increase in adoption of Bitcoin by consumers. The number of Bitcoin wallets - which individuals use to store and transfer their bitcoins - rose 21% to nearly 8 million.
Some other notable facts from the CoinDesk report:
- Total Bitcoin exchange trading volume rose 56% from 2013 to 2014.
- Venture capital investing in Bitcoin was up 32% in North America - but rose 104% in Europe and 91% in the Middle East.
- Financial services were the top target of Bitcoin venture capital in the fourth quarter, grabbing $90.4 million.
- Bitcoin ATMs grew by 36% quarter over quarter to 341 total. But one year ago there were just four Bitcoin ATMs in the entire world.
Whether people are investing in Bitcoin themselves or not, the technology is simply too important for it to disappear.
But Bitcoin is a revolutionary form of money. Not only is it decentralized, but it can embed data in any transaction.
That's a radical departure from how humans historically have used money. And it's why Bitcoin's road to mainstream adoption has been - and will continue to be - a long and rocky one.
That's been especially rough on the Bitcoin price. But even that may not be as bad as it seems.
In his Jan. 5 "tweetstorm" Andreessen also pointed out that over two years the Bitcoin price performance "has been spectacular." Bitcoin traded below $14 in January 2013.
"The entire Bitcoin system is six years old," Andreessen said. "Big things take time."
Bitcoin ETF Gets Closer: The Winklevoss Bitcoin ETF - officially the Winklevoss Bitcoin Trust (Nasdaq: COIN) - took one step closer to launch recently. An SEC filing listed the number of shares and a share price for the ETF. Here's why the Winklevoss ETF will be a watershed event for Bitcoin...
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Related Articles:
- Financial Times: Bitcoin's Upcoming Capital Crisis
- CoinDesk: State of Bitcoin 2015: Ecosystem Grows Despite Price Decline
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, 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.