Let's Talk About Bitcoin

It’s been a big month for Bitcoin. But then again, it’s always a big month for Bitcoin (at least according to its proponents). The US dollar price of Bitcoin surged above $525 again this week, up over 40% from its April lows. Of course, the price is still well off the all-time highs set last December in the $1200 range. But what of all this volatility? Xapo founder and CEO Wences Casares said this week, at a WSJ.D presentation at The Battery, that the volatility is a good thing. Cesares welcomed the current volatility, with an upward sloping line — as he made what appeared to be 45% angle with his arm. Who wouldn’t like that.

Remember, Xapo raised $20m back in March, with participation from Fortress. Xapo aims to facilitate easy access, usage and storage of Bitcoin, with a heavy focus on security and trust. Founder Wences Casares is an impressive guy, coming from humble origins in Patagonia and managing four successful exits. He’s a believer in the tech driving Bitcoin, the potential market of $6 billion souls who don’t (or can’t) currently hold bank accounts, and the need for a global store of value not dependent on central banks. The venture community clearly shares some of his enthusiasm, as VCs invested at least $100m in Bitcoin companies last year, and are on pace to double that in 2014.

But it’s the potential pitfalls of Bitcoin, as highlighted by Casares himself, that really give pause. Casares suggested that a sale of Bitcoin accumulated over just 30 days — or one or two hundred million dollars worth — could do irreparable damage. He is wary of too rapid price increases, and the subsequent pull-backs, dealing a crushing blow to confidence for the upstart currency. But how do you prevent that from happening? There are approximately 12 million Bitcoin in ‘circulation’ currently, with a hard cap at 22 million. If the world decides that this is a good store of value, as Xapo and many others believe, there’s sure to be massive price surges, and those nasty corrections.

If you are uncertain about amassing a large long-term stake in the volatile cryptocurrency, the current trading platforms, e-wallets and virtual vaults out there present quite a few opportunities to profit. And not just for their operators. Online markets can be crossed, with bid prices on one exchange through the ask on another. The problem is getting your cash back in time to take advantage of such trading opportunities. Bitcoin proponents proselytize about rapid, costless transactions, and that might be true if you’re just moving Bitcoin. But you have to buy it with something. Getting your cash back quickly from a dollar conversion can be a different story. BTC-e, one of the most well know cryptocurrency exchanges, addresses this issue head-on on its website: “BTC-e executes all account withdrawals right away or in 1-2 days.” Huh?? If your bank told you that you would send them packing, and the OCC might have something to say about it as well

What if your Bitcoin ‘investment’ doesn’t work? What if it’s the NASDAQ in 2000 and not the next global currency — the death-knoll for gold after five millennia and the US Dollar after a century on top? Well, you can always call on Drizly,which raised $2.5m ($7.3m total) in a follow-on seed round this week. On demand alcohol delivery from this Boston-based (shocker) company. The promised 30 – 60 minute delivery may be several days faster than the time it takes your Bitcoin trade to settle for cash — so kick back and enjoy. Or maybe we’ll all be drowning our sorrows, slurring “I shoulda bought more Bitcoin.”