Last year was a dramatic and, likely, a defining one for bitcoin. The cryptocurrency saw its first real break into the minds of normal investors early in the year and tempted all others with rumors of a Winkelvii driven ETF.
Alas, the fairy tale wasn’t to be, and those who had stories written about them in January are worth a fraction now of what they were at the start of last year. The price of a single bitcoin fell from close to $1000 back last December to around $300 at the close of 2014, making it one of the single worst things you could have invested in last year.
Capital is rushing into cypto startups
It may not be too long before we get to see a bitcoin IPO. There’s been worse tech ideas funded in recent years, and venture capital appears very interested in the area. $336.5 million was invested in the currency by Venture Capital in 2014, more than triple the total from the previous year.
The most dramatic news came from Blockstream which pulled in $21 million in funding last August. The Montreal based company is working on technology that would change the Bitcoin protocol forever. The firm’s Sidechain idea would, if accepted in the core of the cryptocurrency, allow developers to experiment more freely with the technology behind bitcoin and could be used to add a litany of advanced features to the currency.
It’s the tech that’s important, not the coin. This was one of the most popular memes in the financial press about bitcoin this year. The blockchain technology that bitcoin is based on is actually the important part. The currency, goes the story, won’t actually last that long.
There are many who think this is entirely false, and more who see it as a Trojan horse that will lead to the ultimate dominance of the cryptocurrency. Whatever the reality, the idea that the blockchain is the most important part of bitcoin isn’t going away and it may even have steered some of that money into Blockstream.
Big name retailers now accept bitcoin?Some major names began to accept bitcoin in 2014, all the while fueling hopes that the demand problems the currency is plagued by would soon be confined to the past. Overstock, Expedia, Newegg and, incredibly, DISH Network all began taking the currency, and, at the close of the year, even Microsoft got in the action.
The big companies are just those that made the headlines, however. By the close of 2014, it was actually possible to live on Bitcoin in certain parts of the world, and more and more small stores began to accept the cryptocurrency. Bitcoins demand problem has not been solved however, and, unless someone starts levying taxes in the currency, there’s no credible plan for that to happen in 2015.
Regulators tried to understand, not legislate
During 2014 regulators took the surprising step of actually listening to the people working on bitcoin in order to try to understand the technology behind it and the implications of the currency. Rather than the heavy-handed interference that many were expecting, regulators in general used a light touch in order to ensure bitcoin was tracked, but not impeded.
More regulations are sure to hit this year but, for now at least, it seems that governments are cooperating with the industry and keeping an eye on where the whole thing goes. There is one thing that could drive greater regulation, however, and it comes in at number 5.
Bitcoins got stolen, a lot
It’s not all good news for Bitcoin. A jump in value and infamy brought with it a collection of scoundrels and ne’er-do-wells. Most famously, Mt. Gox filed for bankruptcy in April and brought with it the savings of its depositors. Phishing schemes, fake ATMs, and exchanges that can’t keep their own house in order have all added to the problem.
As with all things bitcoin, it’s important to retain some perspective. A huge amount of US dollars were stolen in 2014, and US and European governments are still taxing citizens to pay for bank debts, so it’s difficult to say that the system isn’t compromised. The banks may not have taken deposits directly, but they’re certainly extracting the cash indirectly.