Bitcoin’s Falling Transaction Volume Raises Eyebrows

Morning Report: So what is up with Bitcoin’s falling transaction rate? Here’s one idea.

Last month, we noted that bitcoin transaction volume had fallen by a huge percentage, perhaps even half, after the cryptocurrency’s price collapsed following a staggering run in 2017. Back to Earth, it seemed, was the name of the game for both bitcoin’s price and use.

The twin declines did little to dampen M&A activity, however, as we saw the Poloniex exchange get snapped up for $400 million. The deal helped price Coinbase, at least directionally, given that the latter has higher transaction volume than the former.

But global confirmed bitcoin transactions peaked in December, managed a lower top in early January, and have yet to recover. That Coinbase and other exchanges will see short-term revenue declines seems certain (more here).

The lower transaction volume has some people confused. Especially, perhaps, bitcoin bulls. Fortune has a piece out that dives into the topic that had two quick notes we wanted to highlight. First, this potential thesis:

There are many explanations for the fall-off in trading, from software- to news-related. What’s less understood is why the level hasn’t recovered as Bitcoin’s price made a 50% comeback since Feb. 5. That’s left some investors wondering whether the cryptocurrency is waning in popularity.

And the closing riff:

“Merchants, payment processors and online gambling are moving off of Bitcoin,” [says Kyle Samani who manages a crypto hedge fund] who has $50 million allocated to the space, said in an email. “Our Bitcoin position as a fund is small — I believe Bitcoin is in the process of failing.”

That might sound crazy. How can you run a crypto hedge fund and not believe in bitcoin, the most famous and most valuable crypto? Well Bitcoin has failed its original aims of becoming a means of exchange, and it recently managed to puncture the idea that it works as a store of value, having lost quite a lot of it.

So perhaps bitcoin is slipping not due to crypto failing as an asset class (though recent value declines have been severe), but instead due to bitcoin really being like the Internet in 1993, an analogy the crypto community loves to spout. A lot of the tech we had in 1993 has been left behind. That’s one cycle I’d bet isn’t done repeating itself.

From The Crunchbase Daily:

Uber co-founder launches cryptocurrency

  • Garrett Camp, the chairman and co-founder of Uber, is launching a new cryptocurrency called Eco planned for use in daily transactions around the world. There will be one trillion tokens issued initially, of which half will go to the first billion people to sign up.

Front door tech is hot

  • Amazon’s $1.1 billion purchase of connected doorbell maker Ring is the latest indication that front door tech is a hot space. In recent quarters, venture investors have poured hundreds of millions into smart lock and entrance access tech, looking to modernize the way we open the door.

Helix raises $200M for sequencing

  • Helix, a spin-out from genetic sequencing technology giant Illumina, has held a first close on a planned $200 million funding round led by DFJ Growth. The company offers personal genetic sequencing and analytics providing ancestry and health-related information.

Tracking Y Combinator’s top alum

  • Famed accelerator Y Combinator says its graduates have generated a combined valuation of more than $80 billion. To add some context, Crunchbase News tracked the top 15 YC companies with the highest values to date.

Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.



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