Civic & ABRA Live :: Bitcoin Letter, July 2016
Bitcoin’s volume-weighted-average price on the Bitstamp exchange rose 23.8% in the month of June. Year-to-date, bitcoin has appreciated 54.4%. An investment one year ago would return 2.5 times one’s investment.
If one chose to gain exposure to the bitcoin price by investing in GBTC yesterday, they would have paid an effective price of $1,117 per bitcoin. This is a 65% premium to yesterday’s close on the Bitstamp exchange. If the price of bitcoin were to advance to $1,117, holders of GBTC take the added risk that they may not see any gain if the premium falls to zero, as was the case in October 2015.
BITCOIN HALVING UPDATE
The Bitcoin code states a total of 21 million coins will be released and how the supply of new coins will decrease over time. On July 9th, the mining reward decreased from 25 BTC per block to 12.5 BTC per block (issued roughly every ten minutes). Theoretically, decreasing the rate of supply while demand remains constant should result in price appreciation. As halving dates are known, price should appreciate leading up to a halving date in anticipation of the reduction of supply growth.
Below is the price action surrounding all halving events. The second halving has seen similar price action, albeit with increased volatility.
This is in-line with the prediction of the bitcoin gurus in attendance at our Bitcoin Pacifica conference in September 2015.
There have been some articles on the negative effects the halving might have on the mining industry. Our feeling is that this is a non-story. The halving should have limited implications on the industry at large. As one can see in the below table, the bitcoin reward has halved twice in its lifetime, however, the USD reward has gone up exponentially over that period.
As can be seen below, bitcoin has been the best performing currency across all world markets in six of the past seven years.
When looking at the price action since the recent run-up to the June 18th high of $778, the price looks to be entering a consolidation period similar to those in late 2015 and early 2016. The below chart shows these consolidation periods in which the price experienced higher lows followed by higher highs.
The table below provides details of the bull market price cycles that have occurred since bitcoin’s introduction. We are currently in the longest period of price appreciation since inception.
CIVIC LAUNCHES TO THE GENERAL PUBLIC
Portfolio company Civic is a blockchain-based identity platform where users can protect their identity and control their information.
Identity fraud is a large problem, as over 13 million victims and $15 billion were stolen in 2015. Companies like Lifelock say they protect consumers, but they only alert users after an identity breach has happened while charging a minimum $10/month. Civic alerts users before a breach would happen, offers a $1 million insurance policy for ID theft recovery, and is completely free of charge.
Users submit their basic identifying information. Civic verifies their identity and locks it onto the blockchain. The blockchain is the most secure storage of identity because it is decentralized and immutable in nature. Civic provides real-time mobile and email notifications when your identity is about to be used and credit monitoring for potential fraud indicators. The company also enables 24/7 on-call support from their fraud experts.
Users can sign up for the Civic product at their website www.civic.com.
ABRA IS NOW LIVE IN THE U.S.
Portfolio company ABRA is a blockchain-based remittance and cross-border payments platform. Its mobile application allows one to digitally manage, transfer, and store money. Their remittance app has recently gone live in the U.S. This app is available in both iPhone and Android. This is ABRA’s first move outside of the Philippines in its global expansion plan.
This digital wallet enables consumers to store money on their smartphone. The ability to maintain a balance outside the banking system is what differentiates ABRA from its competitors. With just the recipient’s phone number, one can send and receive money to others using ABRA’s product. In addition to moving money for goods and services, users have the option to either deposit or withdraw funds at a bank or through a network of ABRA tellers.
The latter option allowing consumers to circumvent the banking system is extremely useful for those in developing markets with limited banking options. ABRA effectively allows one to hold, store and move money digitally outside the banking system. We feel this is a huge step forward in financial innovation in the emerging markets FinTech space.
With cross-border remittances totaling over $500 billion annually, and generating over $25 billion in fees, a product like ABRA’s can go a long way towards disrupting an industry that is dominated by very few players charging high fees. The use-cases range from peer-to-peer transfers to retail store owners accepting payments.
We are excited about the progress ABRA is making and the possibilities that their products afford. So far, after the launch, user feedback for the product has been very positive. The idea that one can quickly and cheaply move funds from one country to another with ease from a personal smartphone is extremely powerful. This is the future we see with mobile and digital money, and ABRA is moving this vision forward.
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