6 key points to look out for in Bitcoin’s quarterly report

Last week, CoinDesk released its latest quarterly report on Bitcoin.

Like our current reports, the State of Bitcoin Q2 2015 report takes a comprehensive look at the Bitcoin ecosystem, with the entire report coming in at no more than 100 slides.

With the Greek crisis drawing widespread attention and banks and governments turning their attention to blockchain technology, this was Bitcoin’s first good quarter since last year.

However, the second quarter was not all exponential growth. In this article, we summarize some key details in the report that are easy to overlook.

1. Bitcoin is surpassing the Internet

It’s worth noting that Bitcoin is often compared to the early days of the internet. Both have their roots in fringe ideology, and both have the ability to bring about disruption through distributed data networks, if you believe the propaganda.

Bitcoin development reports have documented this contrast since its inception. So how is the currency performing in the market today?

In terms of investment, bitcoin startups are outperforming expectations — $786 million is expected to be invested in the industry by the end of this year, compared to $639 million for internet companies in 1996.

The investments include the latest $20 million deal for bitcoin miner BitFury in the third quarter, and factor in inflation and other startup operating costs. Last year, bitcoin received $112 million more than internet startups received in 1995.

2. Bitcoin is developing towards currency

In its short history as a currency, Bitcoin has made its name in the media, becoming a popular choice for speculators due to its fantastic rise and fall. However, despite the media hype, Bitcoin's huge volatility has limited its use as an everyday currency.

However, as Bitcoin’s volatility has died down over the past few months, its price peaks have flattened out. The report shows that the second quarter saw the lowest peak-to-trough ratio (20%). At that time, Bitcoin’s highest price was $262.48 and its lowest price was $218.27. This ratio is down from 84% last year.

According to Slide 22, the chain reaction in the second quarter was relatively quiet, as reflected in the investment interest in Bitcoin on CoinDesk and in the headlines of major media outlets.

This also impacted quarterly trading volumes, which continued to decline due to the lack of daily price fluctuations.

3. Bitcoin has yet to win over consumers

So could this decreasing volatility signal Bitcoin’s move away from being an investment vehicle and toward becoming an everyday currency?

However, data shows that Bitcoin still has difficulties in becoming an everyday currency. Although they constitute the main investor group of Bitcoin, in a recent survey by Goldman Sachs, 51% of millennials do not want to use this currency.

Although the number of Bitcoin wallets is steadily rising, we also see that the number of merchants accepting Bitcoin in Q1 began to slow down in Q2.

According to surveys, some businesses have quietly given up using Bitcoin as a means of payment due to poor sales.

4. Chinese Bitcoin miners become the main force

Bitcoin China, AntPool, and F2Pool, all Chinese miners, accounted for more than 50% of the hashrate in June. GHash.io sparked a high-profile discussion about the dangers of Bitcoin mining centralization, known as 51% attacks, which we saw significantly reduced as early as mid-2014.

Likewise, Chinese miners, backed by cheap electricity and a labor force, have demonstrated their ability to crank out massive transactions in a short period of time, critical to an industry that has become a computing power arms race.

Five weeks after BTCChina opened its mining pool, the company claims to have produced more than $1.2 million worth of bitcoins. At the time, BTCChina had only 5% of the network hashing power, but now its capacity has increased significantly.

5. The United States is still a die-hard Bitcoin fan

Even though Silicon Valley’s bitcoin investment fell below 50 percent this quarter after Xapo announced it was moving to Switzerland due to privacy concerns, the U.S. still pumped $834 million into bitcoin startups.

Total funding in the U.S. and Canada grew 28% in the second quarter, with the majority coming from Circle and Ripple, and the region now accounts for 72% of all venture funding.

Currently, 23 countries have venture capital-backed startups, and investment from the United States ($569.1 million) is nearly three times the total of the rest of the world. For example, the United Kingdom, the second-largest country in terms of total investment, currently attracts $42.9 million in Bitcoin investment, but this only accounts for 7.5% of the total investment from allies other than the United States. At the bottom of the table, the Philippines only accounts for 0.02 of the US total. Therefore, the United States is indeed an ideal place to start a Bitcoin company.

6. The bigger your heart is, the bigger the stage is

While that helps it thrive in the land of the free, the second quarter report points to another common thread among well-funded bitcoin startups: their ambitions.

Companies that play multiple roles in the ecosystem, i.e., those with a “global” goal, raised the most funding this quarter ($50.1 million), led by Circle, followed closely by startups that provide financial services ($45.7 million).

This category also includes companies like 21 Inc and Coinbase, which have surpassed wallet and mining companies and currently total over $300 million, accounting for almost 40% of all investments. However, the remaining companies will exceed $100 million in investment.