CoinDesk released their Q2 2014 “State of Bitcoin” report this month. We’ve all heard a lot about bitcoin across blogs, news, twitter, etc., but to see how far bitcoin has come within the last year is really quite astonishing. Despite the Mt. Gox debacle, bitcoin is roaring back in full force.
Here are some figures to remember comparing June 2013 to June 2014:
- The number of bitcoin wallets jumped from 765,039 to 5,327,688, representing a 7x increase
- Market cap rose from $1B to $8.3B
- VC investment saw a 12x increase, rising from $17M to $200M
- The number of merchants accepting bitcoin rose from around 20,000 to 60,000
The question I imagine a lot of investors, and perhaps even entrepreneurs, are asking is “where should I invest?” I think CoinDesk has done an awesome job of categorizing the bitcoin startups to at least provide some clarity.
As far as where the money seems to be flowing, most of it has been allocated to wallets and “universal” startups, which are essentially a hybrid of the other 5 categories. Here are some charts that I have put together using CoinDesk’s data to give us a big picture of where investors are putting their money. Keep in mind that Xapo’s sizable financing round skews the data a bit for 2014 funding. While at the moment they are focused on wallets, I imagine that they will eventually drift towards the “universal” category in the near term.
Personally, I’m interested in bitcoin as a medium for international wire transfers, particularly in developing countries where bank account penetration is low but smartphone penetration is high. For those that work abroad and send money back home, it makes a lot of sense to skip bank accounts and use bitcoin, in the same way that we’ve seen developing markets skip PCs and jump to mobile. Two catalysts to the adoption of bitcoin in these countries are 1) the enormous transaction fees; and 2) the tedious process of having to go in person and wait in line, fill out forms, etc. Admittedly though, the thin market is causing way too much volatility at the moment for it to be a viable option.