Bitcoin round-up: coming of age as price stabilises

Something strange is happening in bitcoin land: there are signs the virtual currency is coming of age, judging by the newfound stability in its price.

Since 3 June bitcoin has been range-bound between $665 (£390) and $562, according to the CoinDesk bitcoin price index, which takes prices from four leading exchanges.

In July that price range narrowed further to $647-$615. This is all the more remarkable given that the digital currency faced potentially negative news flow in the US.

The US government auctioned off bitcoins seized from a website called the Silk Road - an underground marketplace closed down by the FBI on 2 October 2013, where bitcoin was used to buy and sell illegal drugs, guns and more. Market watchers thought the auction would undermine price support.

Going, going, gone

On 27 June the US Marshals Service auctioned off 30,000 bitcoin in 10 blocks for a total value of $17.7 million.

The initial announcement of the auction saw the price of bitcoin fall 6 per cent, dropping below the $600 floor for the first time since May, but it quickly recovered.

The winner of the auction was venture capitalist Tim Draper. Draper has teamed up with bitcoin exchange start-up Vaurum to improve bitcoin liquidity in emerging markets.

He told the New York Times: 'We expect to be able to create new services that can provide liquidity and confidence to markets that have been hamstrung by weak currencies.'

One for the merchants

Leading merchant-facing bitcoin processor, Atlanta-based Bitpay, confirmed in May that it raised $30 million in its latest investment round.

The investors included Virgin Group founder Richard Branson. Branson's Virgin Galactic space travel company accepts payments in bitcoin and uses Bitpay to process them.

Other investors included Peter Thiel, the founder of online payments service PayPal, through his Founders Fund venture capital vehicle. Consultancy firm Aite Group estimates that so far this year 19 bitcoin firms in the US alone have raised around $100 million in funding.

On 17 July BitPay launched a new service on Facebook called Get Bits that aims to bring buyers and sellers together to trade bitcoins. The app does not itself execute the transactions but instead connects 'friends' to trade independently, exploiting the fact that Facebook is the 'the world's largest "web of trust"'.

Winklevoss twins roll out WinkDex for new ETF

US investors Cameron and Tyler Winklevoss, in addition to launching an exchange traded fund (ETF) that is still clearing regulatory hurdles, have now opened up their Winkevoss Index to third-party developers.

The twins' index, WinkDex, tracks the price of bitcoin and will provide bitcoin prices for its forthcoming ETF. By making an application programmers interface - or API - available to developers, the twins aim to provide their index with a measure of credibility and accelerate its option over rival indices such as the widely quoted CoinDesk index.

The ETF, to be called the Winklevoss Bitcoin Trust, will trade on Nasdaq under the symbol COIN and provide traditional investors with a way to take a position on bitcoin by simply buying shares in the ETF without having to worry about digital wallets and other transactional issues associated with trading bitcoin.

No date has yet been set for the ETF's initial public offering, although the Nasdaq filing was made on 1 July last year.

Adoption spreads

Online travel agency Expedia announced in mid June that customers will be allowed to use bitcoin to make hotel reservations on its website. A number of smaller travel agents already accept the virtual currency.

The service is initially being rolled out as US-only. Expedia will use exchange and custody company Coinbase to handle transactions.

US satellite TV company Dish Network has also made it known that it will be allowing its customers to make one-off payments using bitcoin, but does not intend to make this facility available until sometime in the third quarter of the year. In another win for California-based Coinbase, Dish will be making use of its processing technology.

Online marketplace eBay, of which PayPal is a subsidiary, is also mulling bitcoin adoption. Chief executive John Donahoe has provided no timeline on when this might happen but said: 'I think there's no doubt digital currency is going to play an important role going forward, and at PayPal we're going to have to integrate digital currencies into our wallet.'

Apple's bitcoin U-turn

Apple has spent the past year kicking virtual currency apps off its app store but, in a sharp reversal of policy, issued new guidelines to developers, opening the door to virtual currencies.

'Apps may facilitate transmission of approved virtual currencies provided that they do so in compliance with all state and federal laws for the territories in which the app functions,' its revised guidelines state.

Apple is perhaps looking to the future, given the persistent rumours that it intends to launch a payments system to leverage its large base of credit card accounts, estimated to number around 800 million.

The iPhone maker will be hoping it hasn't left it too late, as popular apps such as Blockchain have not returned to the app store following the announcement, and have instead continued to develop web-based mobile apps as an alternative to Apple's closed iOS ecosystem.

Nevertheless, given the pre-eminent position of Apple mobile devices in mobile ecommerce, the move was seen as positive for bitcoin. The price jumped $27 when the news broke at the beginning of June.

Going for Gold

Last week UK-based Netagio launched what it claimed was the world's first bitcoin exchange allowing customers to make three-way trades between sterling, bitcoin and gold.

Netagio is a spin-off from established gold trader GoldMoney and provides secure offline storage for bitcoin at various physical locations in the European Union and Switzerland, while holding enough balance online to facilitate customers' balance transfers.

Investors can open an account with dollars and euros in addition to sterling, although all funds are converted into sterling in order to trade.

The exchange makes its money by using the 'maker-taker' model where sellers receive a 0.1 per cent rebate while buy orders are charged at 0.5 per cent.

Netagio chief executive Simon Hamblin, told Money Observer his company's proposition offers flexibility and value: 'The main advantage is that you can be entirely flexible, without having to pay multiples of trading fees when you reduce or increase one asset and then again when you buy or sell into the other.'

Subscribe to Money Observer Magazine

Be the first to receive expert investment news and analysis of shares, funds, regions and strategies we expect to deliver top returns, plus free access to the digital issues on your desktop or via the Money Observer App.

Subscribe now

Add new comment