Going Lunar

This month is on pace to be the most active month of bitcoin news since November of 2013. Two mega-deals (Coinbase & Ripple). A US-licensed bitcoin exchange with NYSE backing. An imminent revised BitLicense draft (although it’s been nearly six weeks since Lawsky told us that would be coming in just a “couple of days”). A massive hack and quick revival at the industry’s (latest) largest exchange (although that may be short-lived). Miner failures and service suspensions. Massive “alleged” scams in the alt-coin markets boiling over. The beginning of the DPR Silk Road trial. Probable market manipulation and margin trader virtual genocide on the overseas exchanges. And we still have four more workdays!

Let’s start with the big double dose of Coinbase news. On their $75 million round of funding, it wasn’t what they raised or even what the valuation was (just a shade under a cool half billion dollars) that got people buzzing. Rather it was the impressive names joining the round: the New York Stock Exchange, USAA (US financial services giant), BBVA (multinational banking giant), DoCoMo (Japanese telecom giant), former Citigroup CEO Vikram Pandit, and former Thomson Reuters CEO Tom Glocer. These are mainstream, household names, and mark the first Wall Street caliber investments into the bitcoin ecosystem.

Of course, we now know why NYSE got involved. Today, Coinbase launched its exchange, Lunar, the first regulated bitcoin exchange in the country with licenses in 25/50 states. Early returns are positive, although I wasn’t able to verify my ID (I recently changed my address), so haven’t yet been able to test the platform myself. In typical buy-the-rumor / sell-the-news fashion, the price dipped almost immediately after the big reveal — albeit after a 70%+ rally from the recent lows.

Let’s forget about the immediate term price for a second, though: this is the biggest milestone for the industry since 2013's bitcoin Senate hearings.

A regulated and licensed US exchange paves the way for legitimate Wall Street traders and speculators to play with bitcoin. It’s existence hints that the emergence of other competing US exchanges are not too far off either, and the best-in-class will quickly rise to the top. (Coinbase certainly has the pole position.) Liquidity will improve and spreads will tighten as a result of these home-grown exchanges, and you’ll see more currency pairs trickle into the mix, making cheap cross-border bitcoin transactions feasible in the near future. You also need healthy exchanges before you get a healthy derivatives infrastructure, and you need healthy derivatives before you can start thinking about synthetic dollar- or euro-pegged digital currencies.

The timeline for mainstream adoption of digital currencies just moved up 6–12 months, I think. How many people believed that we’d see a US-regulated exchange before 2016 at this point given the prolonged sell-off, Bitstamp hack, and suspicious “bearwhale” trading and collusion amongst a small, but mouthy subset of the community. Not to mention the fact that a sizable minority (if not majority) of bitcoin trading takes place OTC, which undermines the price discovery process and thus screws attempts at creating the reliable price indices necessary to price options or list an ETF like COIN. This early 2015 exchange is quite the unexpected gift from the regulatory gods. Props to Coinbase for pulling it off.

With that said, let’s get back to the price. It’s been nice to have the recent pop, but I don’t know how confident I am that we’re finished tumbling lower. We’ve seen this movie throughout 2014. Instead of predicting the next leg up / down, here are three other predictions related to the price…

1) Since most of the bitcoin trading volume is split between the US and China, and we actually have regulations now, Coinbase is going to become one of the largest and most liquid bitcoin exchanges in the world. Coinbase’s Lunar will become a dominant if not the dominant index price within six months, mercifully killing the Winkdex in its cradle. (Notice how I’m not giving airtime to Gemini?); 2) As a result of Coinbase’s new positioning, it will prove harder for baby whales to manipulate the Lunar market price than it has been with overseas exchanges; 3) New demand-side pressure on the price (finally), as sidelined institutions decide they can finally pass a bitcoin investment through their boards / LPs / compliance officers.

More on the price tomorrow. Stay tuned.

For Entrepreneurs

The MIT E-Lab is a well established (20+ year) program that helps startups by matching them with MIT & Harvard business school students for a semester. The E-Lab is now looking for crypto-currency related startups at various stages, so apply if you think this could help your efforts. (You don’t need to be local, but a c-level exec has to be in Cambridge frequently.) To apply, or for more info on E-Lab visit http://elab.mit.edu/.

Events

Inside Bitcoins Conference and Expo — Singapore (Jan. 27–28), Berlin (Mar. 3–4), and New York (Apr. 15–17)
Inside Bitcoins is the largest bitcoin and blockchain technology focused event series worldwide. At each event you’ll hear about the latest challenges, trends, and opportunities in the industry from experts including Steve Beauregard of GoCoin.com, Marco Santori of Pillsbury Winthrop Shaw Pittman, Brian Kelly of CNBC’s Fast Money, Barry Silbert of Digital Currency Group, Marco Santori of Pillsbury Winthrop Shaw Pittman, and more. Plus, TBI Daily readers get 10% off theSingapore, Berlin, and New York events with code TBIDAILY.

Jobs, Jobs, Jobs

Bitnet, San Francisco, Belfast, London (VC-backed)
-Leading digital commerce platform & former Visa team.
-Open positions: Engineering (Customer Success, Lead UI, Product, DevOps), Sales Director (EMEA), Sales Engineer (San Francisco)
-Check out Bitnet (https://bitnet.io/careers.html) and email jobs@bitnet.io

Coinbase, San Francisco (VC-backed)
-Largest “universal services” bitcoin company.
-Open positions: Security Engineer, Software Engineer (2–3 years mobile product development), Regulatory Compliance Investigator, (1 year conducting SAR investigations)
-Check out Coinbase (https://www.coinbase.com/careers/)

BitGo, Palo Alto (VC-backed)
-The leading Bitcoin multi-sig security company
-Open positions: Back-end / Front-End / iOS / Security Engineers, UX Designer
-Check out BitGo (www.bitgoinc.com/jobs) and email jobs@bitgo.com

Bolt, San Francisco (VC-backed)
-Stealth startup focused on consumer applications of Bitcoin.
-Open positions: Security Engineer, Ruby Engineer, UI/UX Designer, Executive Assistant.
-Check out Bolt (bolt.com) and email jobs@bolt.com.

Elliptic, London (VC-backed)
-Vault and enterprise digital currency services.
-Open positions: Software engineers and business development gurus.
-Learn more and apply at elliptic.workable.com

Today’s Tid Bits

First U.S. Bitcoin Exchange Set to Open
http://www.wsj.com/articles/first-u-s-bitcoin-exchange-set-to-open-1422221641
Coinbase Inc., major bitcoin company with $106 million from the New York Sock Exchange, banks and venture-capital firm has opened the first licensed U.S. exchange for bitcoin. After working five months to win licenses from state financial regulators, the exchange will launch in 25 states, offering greater security for institutions and individuals to trade bitcoin and monitor real-time pricing of the digital currency. Coinbase is offering insurance for traders and will not be charging a trading fee for the first two months of the exchange, but will move on to taking 0.25% of most transactions.
Bitcoin and the Digital-Currency Revolution
http://www.wsj.com/articles/the-revolutionary-power-of-digital-currency-1422035061
Michael J. Casey and Paul Vigna, two WSJ journalists who run the BitBeat blog, discuss how bitcoin (despite its growing pains) will grow to represent the future of money and global finance. The two do not argue that bitcoin will take down the dollar, but state that Bitcoin is much more than a currency, “it is a radically new, decentralized system for managing the way societies exchange value.” The underlying technology, the blockchain, more specifically the public ledger of bitcoin, makes it a revolutionary financial product that can help the world of finance, which as Lawrence Summers told us has “substantial inefficiencies” and is “ripe for disruption,” adapt and survive.
A Weekend in Bitcoin City: Arnhem, the Netherlands
http://www.technologyreview.com/news/534011/a-weekend-in-bitcoin-city-arnhem-the-netherlands/
Russ Juskalian went to Arhnhem, the Netherlands, a place with one of the highest concentration of merchants accepting bitcoin in the world, and lived exclusively on bitcoin for 48 hours. Juskalian, managed to pay for his plane ticket, hotel bill, bar tab, restaurant bill and souvenirs all with bitcoin despite its price decline. The transactions went smoothly, for the most part, but he eventually ran out of merchants and transportation services willing to accept bitcoin. You can read in more detail about his experience in the link above.
Despite Decline, Bitcoin Fans Keep the Faith
http://www.bostonglobe.com/business/2015/01/26/despite-fall-bitcoin-fans-keep-faith/oxq5KOQLykuZu1rFqoPF0N/story.html
Bitcoin’s price fell 13% in two weeks, some bitcoin mining companies closed shop, but bitcoin loyalists remain confident as ever in the future of digital currency. Bitcoin companies continue to receive financial support, as an estimated $335m was invested in bitcoin startups in 2014. Bitcoin’s price may have declined by two-thirds in 2014, but bitcoin believers point to the underlying technology of Bitcoin, and remain confident in its long term value.
Cloud Mining Suffers as Hash Rate Plateaus
http://www.coindesk.com/cloud-mining-suffers-hash-rate-plateaus/
Bitcoin cloud mining, which provide services that lease out hashing power from usually large-scale mining enterprises based in data centers has struggled with low prices. Some have become unprofitable. GHash.io reported a drop from 34,000 active users to 6,000 on January 13th, causing them to pull the plug on their cloud mining operations. Following the 30,000 drop of bitcoin miners, the hash rate briefly crashed and recovered, but as of now it remains constant.
Bitcoin Exchange Bitfinex Denies Allegations of Insider Trading
https://www.cryptocoinsnews.com/bitfinex-denies-allegations-insider-trading/
Bitfinex’s CSO Phil Potter faced criticism after an interview last Thursday, which he seemed to be admitting to insider trading at Bitfinex. Bitfinex has come to Mr. Potter’s defense, clarifying that he did manage a cryptocurrency fund prior to his arrival at Bitfinex, but ceased trading once he took up his role at Bitfinex. However, Reddit’s bitcoin community still suspects a conflict of interest on Mr. Potter’s part and is not yet convinced of his lack of involvement.
CoinFire Site and Twitter Account Hacked
http://cointelegraph.com/news/113353/coinfire-site-and-twitter-account-hacked
CoinFire’s site was briefly taken over by hackers and its twitter account was also hijacked. The hacker tweeted about CoinFire’s SEC articles, referring to the site’s recent reporting that the SEC had begun an investigation into GAW Miners, and claimed that they were fake.

Shape the Future: Q&A: Gavin Andresen, chief scientist, Bitcoin Foundation
http://fortune.com/2015/01/22/qa-gavin-andresen-bitcoin-foundation/
Fortune conducted a Q&A with the Bitcoin Foundation’s chief scientist, Gavin Andresen to discuss how Bitcoin went from idea to reality and what lies ahead for the digital currency. Andresen believes eventually credit card companies will suffer a major breach, and then we will begin to see everyone’s transactions begin to take place on the web. Andresen goes on to briefly explain bitcoin’s cryptography, its code, pending regulation, and how bitcoin will become viable in the mainstream.
Winklevoss Twins Aim to Take Bitcoin Mainstream With a Regualted Exchange
http://dealbook.nytimes.com/2015/01/22/winklevoss-twins-aim-to-take-bitcoin-mainstream-with-a-regulated-exchange/
Cameron and Tyler Winklevoss are attempting to create the first regulated Bitcoin exchange for American customers, what they are referring to as the “Nasdaq of Bitcoin.” The twins have hired engineers from top hedge funds, enlisted a bank and engaged regulations with the aim of getting their exchange of the ground, which will be named Gemini. They plan to open the exchange as soon as they win regulatory approval from the superintendent of New York’s Department of Financial Services, Benjamin M. Lawsky.
PayPal’s Braintree is Now Open to US Merchants
http://cointelegraph.com/news/113344/paypals-braintree-is-now-open-to-us-merchants
Braintree has launched its private beta program, allowing thousands of US merchants to accept bitcoin. Braintree, the online and mobile payment platform of PayPal, teamed up with Coinbase in September to make adding bitcoin payments an easy process for current Braintree vendors. Uber, GitHub and Airbnb are all Braintree clients.
Payments Giant Ingenico Adds Bitcoin Option to POS Terminals
http://www.coindesk.com/ingenico-adds-bitcoin-option-to-pos-terminals/
Paymium, bitcoin payments provider, has partnered with Ingenico Group, one of the world’s largest point-of-sale (POS) solution providers to allow European brick-and-mortar retailers to accept bitcoin. Paymium has created an app, hosted on the Telium Tetra Marketplace solely for its POS terminals allowing merchants to accept bitcoin payments and convert them to euros instantly. Ingenico Group has a commercial presence in more than 125 countries, boasting 22 million POS terminals installed worldwide with an annual revenue of €1.3bn in 2013.
BitFury Eyes Bitcoin Mining Advantage with Immersion Cooling Acquisition
http://www.coindesk.com/bitfury-acquires-immersion-cooling-allied-control/
BitFury Group, major bitcoin mining firm, has signed an agreement to acquire a Hong Kong-based startup that provides cooling systems for supercomputing and data center applications named Allied Control. The deal will make Allied Control a subsidiary and an in-house department of BitFury. BitFury believes the acquisition will make its operations faster, more efficient and better able to deploy in scale.
DigitalBTC Inks Deal With Spondoolies-Tech to Expand Mining Operation
http://www.coindesk.com/digitalbtc-inks-deal-spondoolies-tech-expand-mining-operation/
DigitalBTC, an Australian bitocin mining company is expanding its mining capacity and entering a new contract with Verne Global, a data center provider. DigitalBTC will be acquiring new bitcoin mining hardware from manufacturer Spondoolies-Tech, although the exact details were not revealed. However, digitalBTC did say that the new hardware would expand its processing capacity by approximately 40% for a “small outlay” of about $700,000.
Payment Processor EgoPay Confirms Hack, Insider Suspected
http://www.coindesk.com/payment-processor-egopay-confirms-hack-insider-suspected/
EgoPay, a third-party payment processor, suffered a hack in late December where a person or persons interfered with a number of transactions. After the hack, the company halted all automatic transaction processing, with payments being done manually instead. EgoPay’s staff memebers were suspended following the hack, after the company concluded that someone from within the company conducted the hack.

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