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Not only has venture capital investing in Bitcoin failed to slow even as the price of the digital currency has slumped, but now some big Wall Street names have hopped on the bandwagon.
On Tuesday Bitcoin payments and wallet platform Coinbase announced it had raised $75 million in Series C funding. That's more than double the previous amount of venture capital invested in a Bitcoin company. San Francisco-based Coinbase has now raised a total of $106 million.
But this time it wasn't just the usual Bitcoin-friendly VC firms backing Coinbase.
Topping the list is the venerable New York Stock Exchange, a subsidiary of Intercontinental Exchange Inc. (NYSE: ICE).
"With this investment, we are tapping into a new asset class by teaming up with a leading platform that is bringing transparency, security, and confidence to an important growth market," NYSE president Tom Farley said in a statement.
Two other traditional names investing in Coinbase were financial services company USAA and Spanish banking giant Banco Bilbao Viscaya Argentaria SA (NYSE: BBVA). Japanese telecom firm NTT Docomo, Inc. (NYSE: DCM) also joined the round.
"Investors still have a pretty high conviction on Bitcoin despite what the spot price of Bitcoin is doing," Fred Ehrsam, a Coinbase cofounder, told The New York Times. "This really is people putting their money where their mouth is in terms of betting on Bitcoin as a technology trend."
Why the Top Dogs of Finance Are Investing in Bitcoin
That this new interest from conventional investors comes after a 67% decline in the Bitcoin price last year speaks volumes. They recognize that the real value of Bitcoin isn't the price on any given day, but the technology it's built upon.
That's also why so many tech-oriented venture capital firms have been investing in Bitcoin for more than two years.
Most of the VC firms in the latest Coinbase round, in fact, are no strangers to investing in Bitcoin. They include Andreessen Horowitz, Draper Fisher Jurvetson, Ribbit Capital, and Crypto Currency Partners.
They must see tremendous potential in Bitcoin to dump millions of dollars into cryptocurrency startups. And now traditional investors are seeing that potential, too.
But impressive as it is, Wall Street's sudden desire to invest in Bitcoin is only one sign of bigger things to come for Bitcoin in 2015...
Bitcoin Troubles Fail to Slow Growth of Ecosystem
The Bitcoin ecosystem has grown despite repeated setbacks.
Let's face it, 2014 was a tough year for Bitcoin. From the loss of 750,000 customer bitcoins at the Mt. Gox exchange to outright bans in countries like Ecuador and Bangladesh, Bitcoin spent most of the year on the ropes.
But it hasn't mattered.
The number of merchants accepting Bitcoin exploded from 36,000 to 82,000. The number of Bitcoin wallets more than doubled from 3.19 million to 7.95 million. Bitcoin ATMs went from just four to 341.
And Bitcoin investment accelerated as well.
It especially picked up at the very end of 2014, doubling from the third quarter to the fourth quarter.
For the year, venture capital investment in Bitcoin rose to $336.87 million - more than triple the previous year.
With the $75 million investment in Coinbase, the tally for 2015 is already $80 million. And we're only three weeks into the year.
The trend is likely to keep accelerating. Now that several heavy hitters have started investing in Bitcoin, more will follow.
One thing we know about Wall Street types is that they all fear missing out on the next hot trend. And as the Bitcoin venture capitalists like to point out, Bitcoin technology will likely be as disruptive as the Internet was 20 years ago.
So now that the New York Stock Exchange and Vikram Pandit are investing in Bitcoin, a lot of Wall Street antennae are going up.
The amount of Wall Street money invested in Bitcoin will snowball in 2015. The boost from this new source of capital will cause total investment in Bitcoin to double or even triple again this year.
Also, remember that Bitcoin startups will expand as they gain more capital. For example, Coinbase plans to use its fresh funding to pay for fees to obtain licenses to transmit money, as well as to expand its global footprint from 19 to 30 countries.
That kind of expansion will attract still more big-name attention - and further rounds of investment.
Make no mistake: Bitcoin is growing up.
"In the beginning, you get these wild speculative types, then slowly the numbers get bigger, then the suits move in," Glocer, the former Thomson Reuters CEO, told The Wall Street Journal. "And you wake up one day and it's a billion-dollar business."
Bitcoin Forecast 2015: While 2014 was a rocky year for Bitcoin, a lot of positive things happened away from the spotlight. And those powerful trends have set the stage for some big leaps forward in 2015. Here's why this year will be pivotal for Bitcoin...
Follow me on Twitter @DavidGZeiler.
- The Wall Street Journal: Coinbase Raises $75 Million in Funding Round
- The New York Times: Coinbase, a Bitcoin Start-Up, Raises $75 Million in Vote of Confidence
- Intercontinental Exchange: NYSE Completes Minority Investment in Coinbase
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.