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guybouchard
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March 21, 2017, 04:14:43 AM |
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Putting our Money on Bitcoin (and according to fucktard, The Legends Room)
December 8, 2015
By Stephen Hicks, CEO and Founding Principal of Southridge Capital
In its relatively short existence, Bitcoin the cryptocurrency and payments system has undergone a tremendous transformation in public perception and participation. After its creation in 2008, it was primarily housed in the domain of expert cryptographers. From there, it slowly grew with a small but enthusiastic community who began experimenting with its usefulness. In 2010, a Florida programmer famously ordered two Papa Johns pizzas for which he paid 10,000 bitcoins (worth $25 at the time). Now celebrated annually by bitcoin fans, the pizza order was the first real-world bitcoin purchase and marked the beginning of bitcoins entry into mainstream commerce.
While bitcoin is still in the early adopter stage from a consumer standpoint, hedge funds are becoming more publicly engaged in the bitcoin ecosystem and including bitcoin in their investment portfolios. Sill largely anecdotal, some well-publicized examples include the launch of an institutional grade Bitcoin Hedge Fund by Coin Capital Management, and the Pantera Bitcoin Partners fund, which launched in part with investment from Wall Streets Fortress Investment Group, LLC (NYSE: FIG).
Many venture capital firms and other investors have invested in bitcoin-related enterprises, covering everything from mobile remittances to payments technology. In its latest State of Bitcoin report, Coindesk noted that the bulk of the $433m of new venture capital thats been invested in bitcoin startups since 2012 has come in 2014; a total of $335m was invested in 2014, with a whopping $130m invested in the 4th quarter alone. We believe that the institutional and hedge fund interest in bitcoin will continue to accelerate for a number of interconnected reasons including expectation of price increases, increased use by retailers especially online, and continued interest in how companies can utilize bitcoin technology to streamline their businesses.
We predict that the Bitcoin digital currency will continue to find its way into the daily lives of many consumers, which is one of the reasons we decided to invest in Bitcoin Direct, an automated bitcoin seller, to build and distribute bitcoin ATMs. Bitcoin Direct is a subsidiary of the.Connexus Cattle Corporation (CNXS) (the Company just announced that they are soonchanging their name to the Connexus Corporation and moving in a different business direction),having recently been taken public through acquisition.Connexus has also partnered with celebrity Mike Tyson in order to accelerate the branding of its ATM product which we believe to be a game changer in the industry. We see tremendous potential for bitcoin-related businesses since digital currency can be used for everything from daily consumer purchases to remittances to gaming. We already know that bitcoin ATMs have the capacity to outperform gaming kiosks in places like Las Vegas where the Company has begun to install its ATM machines. Southridge looks for investment where it can enter near the beginning of the life of a new idea and where there are few capacity limitations. The Bitcoin industry clearly fits those criteria from our vantage point.
According to BitPay, a leading bitcoin payment processor, over 100,000 merchants worldwide are now accepting Bitcoin with the number of European transactions alone reaching an all time high of 102,221 in the second quarter of this year. Growth in Latin America appears to maintain its impressive trajectory as well.
In the e-commerce world, the number of retailers accepting bitcoin continues to grow, and now includes major brands such as Dell, PayPal, Expedia, Dish, Intuit, Stripe, and Microsoft. In the
remittance market, which is largely dominated by money transfers from developed countries to developing ones, interest in Bitcoin is tremendous.
Bitcoin currency experienced extreme initial price volatility, having started at $0.10 and peaked at over $1200 in 2013. Todays bitcoin price is closer to $330 after a recent run from the $220 range and is substantially less volatile than in its infancy. A Wedbush report noted that the growing demand for bitcoin stems from an increase in usage for e-commerce payments, remittances and micropayments. As reported by Coindesk, Wedbush expects bitcoin to ultimately account for 10% of the $5.9 trillion online payments market, 20% of the $744 billion remittance market, and 20% of the $924 billion micro transactions market. Importantly and in contrast to both traditional and alternative digital currencies, Bitcoin Technology is virtually hack proof, a main confidence building component in its acceptance.
At the beginning of last year, renowned American entrepreneur and investor Marc Andreessen compared the invention of bitcoin to the invention of the internet, with the same wide-ranging potential for the development of revolutionary products and services. Our firm certainly agrees with this assessment. Further evidence of bitcoin being on the verge of greater acceptance comes from a recent report by Greenwich Associates, which looked at the potential of bitcoin technology for institutional finance. Of the financial professionals interviewed for the report, an astounding 94% believed that systems similar to Bitcoins block chain could be applied in their businesses.
Yet there is still room for greater use and liquidity. It was widely reported that during the Greek crisis, there was an increase in bitcoin prices as some speculated that bitcoin could be an option for Greeks looking to protect wealth, but the reality was that there was very little bitcoin trading related to Greece, and the average Greek citizen has not even heard of bitcoin. While liquidity continues to be a problem for bitcoin, as accessibility is limited, it is possible to buy Bitcoins through a variety of methods, including online venues and now bitcoin ATMs. The launch of bitcoin ATMs, which allow consumers and laypeople to purchase bitcoins, has been widely publicized and will contribute to the public understanding and use of bitcoin. As the number of ATMs increases, we believe that general liquidity will increase, as well.
Additionally, we believe that given the need to stimulate economies throughout the world that
expansionary monetary policy will be the order of the day for quite some time. Bitcoin, with its
stable money supply, represents an attractive currency for individuals looking to offset
inflationary pressures. We believe there will be increased demand for Bitcoin for this reason.
That, combined with our expected performance of Connexus, because of its Bitcoin Direct
acquisition, may provide for price appreciation in the Companys stock. We also believe that part
of the current opportunity is the Companys small market capitalization due to its current price
and outstanding share count, and that in furthering the growing business of Bitcoin Direct, the
market capitalization of the Company should grow commensurately. As such, we believe our
investment is justified.
Bitcoin has come a long way since that first pizza purchase. Bitcoin is going to continue to drive payments innovation for some time to come, and I truly believe institutional investors who ignore this nascent asset class will be looking back at it as a missed opportunity.
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Stephen Hicks is the Chief Executive Officer and founding principal of Southridge Capital, a diversified financial holding company specializing in direct investment and advisory services to small and middle market companies. Southridge has partnered with Bitcoin Direct, LLC, an automated Bitcoin seller and subsidiary of the Connexus Corporation (CNXS), to build and distribute Bitcoin ATM machines.
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