People say Bitcoin is coming back, but it never really left

Last week, the price of Bitcoin briefly broke through $500, and at that moment, some people hailed it as a turning point for the 7-year-old digital currency. "We may have ushered in a bull market again," one "expert" commented, "because time changes everything about Bitcoin."

As the price fell again, a group of people immediately came out and said that the reason why Bitcoin was rising so much was because the Chinese were playing a Ponzi game called MMM, in which Bitcoin was used.

Yesterday, the price of Bitcoin stood at $330. This is $800 lower than the highest point at the end of 2013. "Does the recent fluctuation in Bitcoin prices indicate that cryptocurrencies are recovering?"   The Financial Times wrote, "Or is it simply a case of highlighting its get-rich-quick schemes and endless showboating." Good question.

But for Coinbase CEO Brian Armstrong, the price of Bitcoin (see chart above) is not the best way to judge the health of the digital currency. "Sometimes I feel like running a Bitcoin company has to be like running a public company," he said. "Everyone is too focused on price, and that leads to short-term thinking."

A better barometer, in his view, is how many people in the world are using Bitcoin (see chart below). And that number is rising. Bitcoin usage, after a brief dip following the collapse of Mt. Gox, has been rising almost steadily. In fact, last week, as the price of Bitcoin broke through $500, Bitcoin usage reached an all-time high, more than double any month in the past 12 months. "Real usage is catching up with speculation," Armstrong said.

Daily transaction volume, data source: BLOCKCHAIN.INFO

Armstrong's point is that for people like him (and companies like Coinbase), their ultimate goal is to make it easier for anyone to store, send and receive money with Bitcoin. "We want the world to have an open payment network," an Internet of currency, he believes that the price of Bitcoin may not be too important. Although Bitcoin is also a means of speculation, a currency that can be used to make money. Peter Van Valkenburgh, director of research at Coin Center, believes that the recent Bitcoin price fluctuations may be driven by speculation. However, this is only part of Bitcoin's grander story.

More Bitcoin in Flow

To be sure, the chart above shows that bitcoin activity is on the rise, but that doesn't necessarily mean that many people are actually using the digital currency to pay for things, like socks, food and apps. When Overstock.com began accepting bitcoin in early 2014, it was the largest online retailer to accept bitcoin, but nearly two years later, bitcoin transactions only account for about 0.05% to 0.1% of the company's sales, said Judd Bagley, a spokesman for the company. The chart provided by Armstrong shows the total number of transactions that occur on the bitcoin network, not just those generated by people paying for goods and services, but also transactions between users.

“With basic payment apps, we do see usage increasing. But it’s important not to get too optimistic,” Van Valkenburgh said. “It’s clear that U.S. consumers (in developed countries) have a lot of payment options.”

More importantly, a lot of recent Bitcoin activity could be considered, well, speculation. But the fact is: more and more people and organizations, for one reason or another, are beginning to adopt Bitcoin. The big question is, will Bitcoin become a mainstream currency, not just a commodity that can be bought and sold? We don't have an answer for this yet, but there are signs that we are heading in that general direction.

Currency without borders

Coinbase announced that 41,000 merchants and 2.8 million users are using its services, not only as an exchange for buying and selling bitcoins, but also as a digital wallet for storage and payment, among other applications. After bitcoin's surge last week, which once reached 70%, Coinbase's new registered users surged by 3,500 a day. On the other side of the Atlantic, European bitcoin payment processor Coinify said its business grew by 30% this month and 600% year-on-year, although it did not provide specific user numbers.

Meanwhile, Cameron and Tyler Winklevoss recently received approval from regulators in New York and other states to launch their Gemini exchange. An exchange called ItBit received similar approval. Regulators, even in the U.S., are beginning to embrace the technology in ways they haven’t in the past.

As more businesses and individuals adopt Bitcoin, the currency moves closer to Armstrong's vision of an "internet of money." If you have an open network of money, we can build and adopt new financial technologies faster and more easily. "Today, a lot of innovation is held back by red tape, barriers, friction, and so on," Armstrong said.

If Bitcoin goes mainstream, it will make it easier for companies to send and receive money across borders. And in developing countries, where online banking and payments are not as popular as they are in the United States, Bitcoin gives people power that they would not otherwise have.

A changing market

There are also a growing number of non-monetary applications using the bitcoin blockchain. For example, Overstock is running a new project called TØ that uses the blockchain to process stock trades. In recent months, some of Wall Street's biggest players have followed Overstock's lead. Nasdaq is building a system that uses the blockchain to manage trading in private markets, and the exchange believes that the blockchain may also be applicable to public trading markets.

"Blockchain may have some transformative impact on the capital markets," said Terry Roche, chief analyst at TABB Group.
"The rhetoric right now is that blockchain will reshape Wall Street, but currencies like Bitcoin will never get there," said Jamie Dimon, CEO of JPMorgan Chase, last week. When Armstrong heard such talk, his first thought was that Bitcoin's influence is expanding, which is a good thing. He is convinced that other alternative uses of blockchain are just a stepping stone for Bitcoin to be accepted as a currency.

"They're taking an iterative step," Armstrong said of Wall Street. "They're going to do some experiments, maybe it's going to be a year or two. They're going to realize that blockchain is great, but the biggest application of blockchain is Bitcoin. I still believe 100% that Bitcoin is the future."

It could be, or it could be neither. But as Van Valkenburgh points out, the steady rise in Bitcoin activity could be a sign that there are a lot of other people who feel the same way as Armstrong. Some of them are certainly looking for short-term gains, but the broader expansion of the Bitcoin community could be a sign that more people think its future is a good bet.

Original article: http://www.wired.com/2015/11/bitcoin-is-back-but-it-never-really-left/
Author: CADE METZ
Compiled by: Satuoxi
Editor: Satuoxi
Source (translation): Babbitt Information