State of Bitcoin Q3 2014

State of Bitcoin Q3 2014
7th October 2014
State of Bitcoin Q3 2014 1

Contents
1. Summary and Adoption Dashboard
2. Price and Valuation
3. Media
4. VC Investment
5. Commerce
6. Technology
7. Regulation and Macro

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• Our Bitcoin Price Index serves as an industry reference point
• London-based and remote team with a global focus
• Our editors are based in London, Boston, San Francisco and Tokyo

Summary and
Adoption Dashboard

Q3 2014 Summary
Bitcoin is further integrating with
existing payment infrastructure (eg
PayPal, Square) and some banks
Overall, the bitcoin ecosystem
appears to have entered a relatively
‘quiet building’ phase in Q3
All-time bitcoin VC investment up
to $317m; 2014 run rate on track
to well exceed 1995 Internet
Regulatory environment continues to
see challenges (eg NY BitLicenses,
Kyrgyzstan ban)
Bitcoin’s price down 40% in Q3,
down another 10% at start of Q4
amid much debate about causes
Ever larger businesses continue to
adopt bitcoin (eg Dell, which is offering
10% off certain products with bitcoin)

Key Bitcoin Adoption Metrics
Quarterly Last 12 Months
Sep-14 Jun-14 Q/Q Δ Sep-13 Δ
Commerce
Wallets 6,559,978 5,427,688 21% 1,353,201 5x
Merchants 76,000 63,000 21% 10,000 8x
Merchants’ annual revenue ($bn) 86 29 196% 0 N/A
ATMs 251 103 144% 0 N/A
Unique bitcoin addresses 184,554 136,152 36% 61,734 3x
Industry
All-time VC investment ($m) 317.0* 225.3 41% 30.4 10x
Number of VC-backed startups 66* 50 32% 14 5x
Media
Mainstream media mentions 9,398 9,024 4% 1,794 5x
Technology
Network Hash Rate (billion/second) 261,900,382 111,194,683 136% 1,213,246 216x
Github no. of updated repositories 18,753 15,109 24% 1,573 12x
Valuation
Bitcoin market capitalization ($bn) 5.2 8.3 -37% 1.5 3x
*Includes recent Q4 deals (eg Blockchain $30.5m).
Sources: CoinDesk, Blockchain.info, BitcoinPulse, Github, Coin ATM Radar. Figures used are as of end of quarter.

Price and Valuation

CoinDesk Bitcoin Price Index –
Q3 & YTD by the Numbers
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC
8
www.coindesk.com/price

A Remarkable Coincidence?
Bitcoin’s price dropped in Q3 by an almost identical % as its rise in
Q2
-39.6% +39.4%
%Δ of Q3/Q2 Close Price %Δ of Q2/Q1 Close Price
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC www.coindesk.com/price

$700
$650
$600
$550
$500
$450
$400
$350
$300
Bitcoin’s Price Has Been Declining on
Steadily Rising Trading Volume
11 Aug
Blockchain first
company to
pass over 2m
bitcoin wallets
18 Aug
Bitcoin price
suddenly drops
in ‘flash crash’
9 Jul
Bitcoin industry discussion
of concerns over mining
pool 51% network control
18 Jul
Dell
announces it
will accept
bitcoin
22-23
Sep
PayPal and
Square
announce
bitcoin
integration
8 Jul
Xapo
announces
$20m funding
round
21 Aug
Following
complaints, NY
extends BitLicense
comment period
9 Sep
Supposed Satoshi
Nakamoto email
account ‘hack’,
blackmail attempt
30-Jun 7-Jul 14-Jul 21-Jul 28-Jul 4-Aug 11-Aug 18-Aug 25-Aug 1-Sep 8-Sep 15-Sep 22-Sep 29-Sep
Source: CoinDesk Bitcoin Price Index, daily data collected at 00:00 UTC www.coindesk.com/price

Total Exchange Trading Volume Sees
Steady Growth
Cumulative Trading Volume (bitcoins)
Source: CoinDesk, Bitcoinity
120,000,000
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000
0

Chinese Yuan (Renminbi) Denominated Bitcoin
Trading Continues to Gain Share on US Dollar
CNY vs USD Denominated Bitcoin Trading Market Share,
Monthly BTC (unit) volume, April – September 2014
Month CNY USD
April 63.6% 36.4%
May 66.7% 33.3%
June 65.3% 34.7%
July 68.9% 31.1%
August 67.5% 32.5%
September 71.5% 28.5%
Source: Bitcoinity. Based on exchange data from ANXBTC, Bitfinex, Bitstamp, BTC China, BTC-e, Huobi, LakeBTC, and OKCoin.

Growing Merchant Adoption Should Not
Drive Down Bitcoin’s Price
‘The Virtuous Bitcoin Commerce Cycle’ • Right now, there are too
Consumer
converts fiat
to bitcoin
Consumer
spends bitcoin
at merchant
Merchant
utilizes
payment
processor
Payment
processor
converts
bitcoin to fiat
few merchant transactions
to have a significant
influence on price (eg
Overstock.com is only
averaging $15k/day in
sales conducted in bitcoin*)
• In the short-term, it’s true
that timing differences may
lead to commerce supply-demand
imbalances
• Over the medium term,
however, bitcoin-to-fiat
conversions by payment
processors should be
balanced by fiat-to-bitcoin
conversions by bitcoin-spending
consumers
*Source: http://www.coindesk.com/overstock-reveals-bitcoin-sales-averaging-15000-per-day/

The Mining Arms Race: A More Plausible
Bitcoin Price Drop Theory?
Bitcoin Network Hash Rate (billions of hashes/second), 2010 – Present
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
0
Source: Blockchain.info
• To remain competitive, miners – who possess perhaps the largest (and ever-growing)
supply of bitcoins – must sell bitcoins to finance running costs and
hardware upgrades

Other Possible Explanations for Bitcoin’s
Price Decline Include …
• Early adopter sales
• Technology equities correction
• Strong US dollar
• Technical (chart) trends
• 51% attack concerns
• Global instability
• Lower bitcoin price volatility =
fewer speculators
• Seasonal factors (eg “sell in
May and go away”)
• Regulatory concerns (eg NY
BitLicenses)
• Competition concerns (eg
Apple Pay)

State of Altcoins: Number of Altcoins Up 2x in Last Six
Months, but Market Cap Share Down 65%*
216
262
282
347
362
478 483
23%
9%
2%
7%
6%
5%
8%
25%
20%
15%
10%
5%
0%
600
500
400
300
200
100
0
Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14
Total number of altcoins Altcoins Market Cap Share (%)
*Note: altcoin market cap share calculated by dividing the sum of all non-bitcoin cryptocurrency market caps by all cryptocurrency market caps
(including bitcoin). For example, if altcoins have 8% market value share, then bitcoin has 92% market value share.
Sources: CoinMarketCap, Internet Archive

While Significantly Below March 2014 High, Current Relative
Value of Altcoins is in Line With Historical Average
4%
9%
38 37
64
83
140
216
262
282
347
362
478 483
9%
9%
12%
23%
9%
2%
7%
6%
5%
8%
25%
20%
15%
10%
5%
0%
600
500
400
300
200
100
0
Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14
Total number of altcoins Altcoins Market Cap Share (%)
Note: altcoin market cap share calculated by dividing the sum of all non-bitcoin cryptocurrency market caps by all cryptocurrency market caps
(including bitcoin). For example, if altcoins have 8% market value share then bitcoin has 92% market value share.
Sources: CoinMarketCap, Internet Archive

Media

Selection of Q3’s Biggest Bitcoin Stories
Dell becomes the
largest company to
accept bitcoins as
a means of
payment
Debate about causes of mid-August bitcoin
price crash and downward price trend
Mainstream payments services
announce bitcoin integration
Google integrates bitcoin price into search

Seven of the Most Popular CoinDesk Q3
Stories About Bitcoin’s Price (vs Four in Q2)
Rank Title Date
1 Tim Draper: Bitcoin’s Price Still Headed to $10k 12th Sep
2 Downward Pressures Persist as Bitcoin’s Price Declines to Near $400 19th Sep
3 State of Bitcoin Q3 2014 Report Reveals Expanding Bitcoin Economy 10th Jul
4 Did Margin Trading Crash the Price of Bitcoin? 15th Aug
5 US Marshals: One Auction Bidder Claimed All 30,000 Silk Road Bitcoins 1st Jul
6 Price of Bitcoin Drops Below $400 in BTC-e Flash Crash 18th Aug
7 Litecoin Price Decouples from Bitcoin, Slump Continues 2nd Jul
8 Bitcoin Price Drops Below $600 After Relative Stability 24th Jul
9 Price of Bitcoin Falls to $500, Lowest Level Since May 14th Aug
10 PayPal Announces First Partnerships in Bitcoin Space 23rd Sep
Source: CoinDesk

Continued Mainstream Media Interest
in Bitcoin
Stories Published Mentioning Bitcoin
0 1000 2000 3000 4000 5000 6000
Q3 2012 to Q3 2013 Q3 2013 to Q3 2014
Source: respective publishers’ websites
Reuters
Sina
Guardian
Bloomberg
FT
NYT
WSJ

Innovative Tools are Emerging to Monitor
Attitudes Towards Bitcoin
CoinDesk Bitcoin Sentiment Index (BSI)
Sources: CoinDesk, Qriously http://www.coindesk.com/sentiment-index/
• The Bitcoin Sentiment Index is a
measure of whether individuals
feel the digital currency’s
prospects are increasing or
decreasing on any given day
• Powered by mobile ad data, the
index provides a snapshot of the
general attitude towards bitcoin in
the US and UK

‘Bitcoin’ Searches During Q3 Stayed Relatively
Constant, but Still Well Below Earlier Peaks
Past 90
Days
Past 12
Months
Source: Google Trends data as of 2 Oct 2014

Related ‘Bitcoin’ Searches Are Becoming More
Sophisticated, Evolving Beyond ‘What is Bitcoin?’
Related Searches: Top Related Searches: Rising
Source: Google Trends data as of 2 Oct. 2014
Past 90
Days
Past 12 Months

VC Investment

Two Biggest Bitcoin VC Deals in Q3
$20m $14m
(Series A) July 2014 (Series A) September 2014
Source: CoinDesk (http://www.coindesk.com/bitcoin-venture-capital/)

Q3 Bitcoin Venture Capital Investment Down
From Q2, Up Slightly Over Q1
Total VC investment in
cryptocurrency startups to date*:
Q3 2014 bitcoin VC investment:
$60m $317m
Q2 2014 bitcoin VC investment:
$73m
Increase in total to-date VC
investment from end of Q2*:
+41%
*Q3 figure excludes recent Q4 deals (eg Blockchain $30.5m) but all-time figure of $317m and % growth includes these Q4 deals.

Europe Heats Up: Gained Overall Investment
Share Again in Q3 and Saw the Largest Q/Q %
Increase
Regions
Q3
($m)
Q2
($m)
Q/Q Δ
($m)
Q/Q Δ
US &
Canada
201.1 165.8 35.3 21%
Europe 48.9 30.6 18.3 60%
Asia 26.5 20.8 5.7 27%
Middle
5.5 5.5 0.0 0%
East
L.
America
3.1 2.3 0.8 35%
Total 285.0 225.3 59.8 27%
$ Invested as of Q2
$ Invested as of Q3
Europe
17%
Asia 9%
Middle
East 2%
Latin
America
1%
US &
Canada
71%
Europe
13%
Asia 9%
Middle
East 2%
Latin
America
US & 1%
Canada
78%
• Latin America had the second largest Q/Q % increase in investment
• US & Canada share declined slightly, but still dominates with 71% of all VC $
to date
Note: $ invested represents all-time total bitcoin VC investment at the end of each respective quarter.

While the US Continues to Dominate Bitcoin VC
Investment, its Total Share Declined 7% in Q3
Total Funding (millions)
$0 $0 $0 $0 $1 $1 $1 $1 $2 $2 $3 $4 $6
$12 $15 $17 $21
$201
$200
$150
$100
$50
$0

Silicon Valley’s Share of All-Time Bitcoin VC
Investment Slipped Slightly From 48% in Q2 to 44%
$ Invested No. of Companies
Tech hub
concentration
Value ($m)
No. of
companies
Silicon Valley 126.5 21
Rest of World 158.5 43
Total 285.0 64
Silicon
Valley
Rest of 44%
World
56%
Silicon
Valley
33%
Rest of
World
67%
• Share of VC-backed bitcoin companies based in Silicon Valley continues to
slide, down from 37% in Q2 to 33% in Q3
• Total number of VC-backed bitcoin companies increased from 49 in Q2 to 64
in Q3, a 31% increase

Bitcoin VC Investment is Broadening
Around the Globe
• Six new countries (Germany, Denmark, India, Japan, Luxembourg and
Panama) added their first VC-backed bitcoin startups in Q3, a 2x increase
over the number of new countries in Q2

2014 Bitcoin VC Investment Projected to
Surpass Early-Stage Internet Investments
Bitcoin vs Early Internet VC Investment (millions)
$91.8
$290.0
$250.1
2013 Bitcoin 2014 Bitcoin Run Rate 1995 Internet*
*Includes first sequence venture deals but excludes late-stage 1995 internet investments ($257.6m). For additional disclosure on
methodology see http://www.coindesk.com/following-money-trends-bitcoin-venture-capital-investment/
Source: CoinDesk, PricewaterhouseCoopers
$350
$300
$250
$200
$150
$100
$50
$0

The Bitcoin Startup Ecosystem:
Six Different Bitcoin Company Categories
Universal
Wallets
Payment
Processing
Mining
Exchanges
Financial
Services

Wallets Raised the Most Funding in Q3,
Followed by Financial Services and Mining
Q3 VC Investment by Ecosystem Category (millions)

Universals Still Command the Most VC
Investment, but Share Slipped by 3% in Q3
$ Invested as of Q3 $ Invested as of Q2
Payment
Processo
r 16%
Exchang
e 16%
Financial
Services
Mining 9%
12%
Wallet
22%
Universal
25%
Sector
Q3
($m)
Q2
($m)
Q/Q Δ
($m)
Q/Q Δ
(%)
Universal 63.9 59.4 4.4 8%
Financial
Services
49.8 33.5 16.2 48%
Mining 48.0 34.0 14.0 41%
Wallet 44.2 21.4 22.8 107%
Exchange
41.1 39.0 2.1 5%
Payment
Processor 38.2 38.0 0.2 0.6%
Total 285.0 225.3 59.8 27%
Payment
Processor
13%
Exchange
14%
Financial
Services
Wallet
15%
Mining 17%
17%
Universal
22%
• Wallets, Financial Services, and Mining sectors continued to receive the lion’s share
of investment in Q3
• Exchanges have only received a combined $4 million over the last two quarters
Note: $ invested represents all-time total bitcoin VC investment at the end of each respective quarter.

Increasing Number of Universal Bitcoin
Companies (Up Over 2x Q/Q)
• As we correctly forecasted in the Q2 State
of Bitcoin, “more and more bitcoin startups
will pursue the universal model”
• Universals operate across more than one
aspect of the bitcoin value chain (eg
Coinplug provides payment processing,
wallet and ATM)
• Universal bitcoin companies leverage two
key elements of financial services:
efficiency and trust
The Universals

Q3 Investment Rounds in Bitcoin Startups (contd.)
Close
Date
Company Size ($m) Round Select Investors Headquartered
Sep-14 Coinapult 0.78 Seed
Bitcoin Opportunity Corp, Roger Ver,
FirstMark Capital, Erik Voorhees, Ira
Miller
Panama City
Sep-14 Coinify* 0.34 Seed SEED Capital Copenhagen
Sep-14 CoinPlus 0.22 Seed Unknown Luxembourg
Sep-14 Koinify 1.20 First
IDG Capital Partners, Brock Pierce,
zPark Ventures, Danhua Ventures
Mountain View
Sep-14 Gem 2.00 Seed
First Round Capital, Tekton Ventures,
RRE Ventures, Mesa+, Amplify.LA,
Idealab, Baroda Ventures, Crypto
Currency Partners, QED Associates,
Bitcoin Shop, James Joaquin
Venice
*In instances where only an approximate round size is provided (eg Coinify reporting that it raised "several million DKK"
then the low end of the round range estimate is used (eg 2 million DKK for Coinify).

Close
Date
Sep-14 KnCMiner 14.00 Seed Creandum Stockholm
Aug-14 Korbit 3.00 Seed
Softbank Ventures Korea, Pantera
Capital, BAM Ventures, Bitcoin
Opportunity Corp, Tim Draper, Pietro
Dova, Strong Ventures
Seoul
Aug-14 Chain 9.50 Seed
Khosla Ventures, Pantera Capital,
Barry Silbert, RRE Ventures, SV
Angel, Thrive Capital, 500 Startups
San Francisco
Aug-14 BitX 0.85 Seed
Bitcoin Opportunity Corp, Carol
Realini, Ariadne Capital
Singapore
Aug-14 BlockTrail 0.65 Seed Lev Leviev Amsterdam
Aug-14 Bitbond 0.27 First Point Nine Capital Berlin
Aug-14 Unocoin 0.25 First Bitcoin Opportunity Corp Bangalore

Close
Date
Jul-14 Volabit 0.25 First Bitcoin Opportunity Corp Puerto Vallarta
Jul-14 BitFlyer 1.60 First
Unnamed Japan-based venture
capital firm
Tokyo
Jul-14 Elliptic 2.00 First Octopus Investments London
Jul-14 TradeBlock 2.80 First
Andreessen Horowitz, Barry Silbert,
Devonshire Investors, FinTech
Collective
New York
Jul-14 Safello 0.25 Seed Bitcoin Opportunity Corp Stockholm
Jul-14 Xapo 20.00 Seed
Index Ventures, Greylock Partners,
Emergence Capital Partners, Yuri
Milner, Max Levchin, Jerry Yang
Palo Alto

Commerce

>75K Merchants Now Accept Bitcoin,
Up From 63K in Q2 (+19%)
40K 35K
Source: Coinbase and BitPay

Forecast Cut for Bitcoin-Accepting
Merchants by 10K to 90K by End of Year
R² = 0.9777
120,000
100,000
80,000
60,000
40,000
20,000
0
Total merchants Forecasted merchants
Sources and notes: total current merchants based on data from Coinbase and BitPay. Historical Coinbase data provided by BitcoinPulse.
BitPay historical data between new merchant press release announcements of 10,000 (16th Sep 2013), 20,000 (13th Jan 2014) and 30,000
(28th May 2014), respectively, calculated using linear interpolation.

Dell is by Far the Largest Retailer to
Date to Accept Bitcoin
@Dell tweet:
“
If you’re a retailer,
there’s really no
reason not to accept
bitcoin at this point
”
$56.9 billion annual revenue
Source: CoinDesk, Absolute Return

Companies Representing >$85 Billion in Annual
Revenue Now Accept Bitcoin
Largest Bitcoin-Accepting Retailers
Rank Company
Annual Revenue
($bn)
1 Dell 56.9
2 Dish Network 13.9
3 Expedia 5.0
4 Monprix* 4.3
5 NewEgg 2.8
6 Overstock 1.3
7 TigerDirect* 1.0
8 1-800 Flowers 0.8
Total 85.9
*Monprix is a private company, most recent revenue data available used from 2005. TigerDirect estimate provided by parent company investor relations.
Other divisions that are part of a larger parent organization, but do not break out individual divisional revenues, are excluded.

Some Merchants are Seeing Significant Sales in
Bitcoin
$300,000
$1,000,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
Q1 Monthly Avg. Projected Q4 Monthly Avg.
Patrick Byrne, Overstock
• Overstock.com is averaging $15k per day in goods sold for bitcoin and is
forecasting over $1m per month by fourth quarter in 2014
Source: http://www.coindesk.com/overstock-reveals-bitcoin-sales-averaging-15000-per-day/

A Growing Number of Compelling Reasons to Use
Bitcoin to Make Purchases
Dell is offering up to 10% off
certain products for
purchases made with bitcoin
Purse.io customers often
save 10-25% on Amazon
Wish List items purchased
by third parties seeking to
acquire bitcoins for fiat

Approximately 8 Million Bitcoin Wallets
Still Forecasted by End of Year
Total Wallets
Forecasted Wallets
R² = 0.96
R2 = 0.9365
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
Sources and notes: total wallets based on data from Blockchain.info, MultiBit, Coinbase, Andreas Schildbach (Android Bitcoin Wallet
developer). Historical Coinbase data provided by BitcoinPulse.

Bitcoin Remains the Coin of Choice in the Post-
Silk Road Online Black Market
Agora, which is larger than Silk Road 2.0, only accepts bitcoins
• The view that bitcoin would be quickly supplanted by DarkCoin or another
theoretically more anonymous altcoin for black market use appears to be
unfounded
Source: Wired http://www.wired.com/2014/09/agora-bigger-than-silk-road/

More and More Bitcoin Companies are Advertising
Their Insurance Protection to Customers
Insured by Marsh Insured through London specialist
market, brokered by CBC Insurance
Insured by Aon
Insured by Meridian
• However, the question remains whether companies that have bypassed
insurance (eg Blockchain), or openly eschew it (eg BitReserve), will see lower
customer adoption

Now Over 260 Bitcoin ATMs
Around the World
Source: CoinDesk (http://www.coindesk.com/bitcoin-atm-map/)

Most Bitcoin ATMs Concentrated in
North America and Europe
• Lamassu accounts for over a third of the bitcoin ATM market
Source: CoinDesk

Technology

Rise of Discus Fish Mining Pool as a GHash
Counterbalance Has Tempered 51% Attack Concerns
Source: 4-day average as of 2 Oct 2014 blockchain.info/pools

Bitcoin Developer Ecosystem Continues to
Grow, but Has Slowed Recently
• Developer engagement on open-source projects is tapering
Source: BitcoinPulse

Will the Decline in the Number of Bitcoin Nodes
Leave Bitcoin Overly Centralized?
• Bitcoin network nodes are needed to ensure all valid bitcoin transactions
that occur are broadcasted in a timely manner
• The number of bitcoin nodes has fallen from a peak of 250k at the end of
Source: BitcoinPulse
2013 to under 7k

Bitcoin’s Inverted Pyramid Problem Persists
The multi-billion
dollar bitcoin
ecosystem,
comprised of
hundreds of
companies and
thousands of
people …
… rests on the
work of a small
handful of core
bitcoin protocol
developers
• Mike Hearn, bitcoin core developer: “Basically, progress on the bitcoin protocol
has ground to a halt.”
• Questions around how much the problem is due to a lack of funding and
personnel vs governance issues
Source (Mike Hearn quote): Epicenter Bitcoin

Bitcoin 2.0: Possible ‘Native Apps’
“I am thinking that we will start to see native applications of bitcoin. These would
be things that simply could not exist without this technology.” – Fred Wilson
• Allocating bandwidth, storage, compute: new ways to share and
trade networked resources
• Smart marketplaces: open up access to crowdfunding and crowd labor
services (oDesk, 99 Designs, Beacon Reader, Mechanical Turk) to
anyone with a smartphone
• Micropayments: enabling micropayments on the web and not just for
mobile in-app payments
• Incentivized social software: supplementing likes, followers, karma,
upvotes etc with monetary incentives
Sources: http://avc.com/2014/09/the-bitcoin-hype-cycle/ and http://cdixon.org/2014/10/04/some-ideas-for-native-bitcoin-apps/

Regulation and Macro

Launch of New Bitcoin Advocacy Groups
Emphasizes Ongoing Regulatory Challenges
Jerry Brito, Coin Center
Jon Matonis, Bitcoin Foundation Perianne Boring, Chamber of
Digital Commerce
• Questions exist around how related Coin Center’s launch is with ongoing
controversy surrounding the Bitcoin Foundation

Bitcoin Businesses are Already Pulling Out
of New York Due to BitLicense Concerns
New York
vs
London
NY’s Ben Lawsky UK’s George Osborne
• Circle and others have announced they won’t accept NY-based customers if BitLicense
rules are implemented in their current form
• UK Chancellor George Osborne has announced he is looking to make the UK attractive to
bitcoin startups and capital
• Startups like Epiphyte have already relocated from NY to seemingly friendlier London

Well-Funded Bitcoin Startups are Able
to Secure Banking Relationships
$27.5m funding
$10.0m funding
$9.0m funding
$5.0m funding
Reasons banks
hesitate on
bitcoin:
• bigger risks
• higher costs
• more work
• Low ROI
• regulatory
pressure
• prohibited by
regulators

Secession Votes Prompt Monetary Questions and
Could Create Openings for Alternative Currencies
Debate over currency was at the
forefront of Scotland’s
independence campaign
Catalan independence vote
scheduled to take place on 9th
November

New Index Ranks 177 Countries by Relative
Potential to Adopt Bitcoin
The Bitcoin Market Potential Index™ (BMPI) – The Top 10
Rank Country
1 Argentina
2 Venezuela
3 Zimbabwe
4 India
5 Nigeria
6 Brazil
7 United States
8 Nicaragua
9 Russia
10 Iceland Cristina Fernández de
Kirchner’s Argentina is #1
Source: Hileman (2014) ‘Bitcoin Market Potential Index’, London School of Economics working paper.
Announcement article: http://www.coindesk.com/argentina-most-likely-adopt-bitcoin/

Index Rankings Determined by Seven
Equally Weighted Categories
‘Positive’ Index Ranking Drivers ‘Negative’ Index Ranking Drivers
• Remittances • Inflation
• Technology penetration • Financial repression
• Bitcoin penetration • Financial crisis – historical
• Black market
Index methodology: 39 differently weighted variables (and counting) grouped into
the above seven equally weighted sub-index categories
Source: Hileman (2014) ‘Bitcoin Market Potential Index’, London School of Economics working paper

Latin America Most Fertile Region for
Bitcoin, Followed by Africa and Post-Soviet
BMPI Regional Distribution
-
Top 30
BMPI Regional Distribution -
Top 10
Source: Hileman (2014) ‘Bitcoin Market Potential Index’, London School of Economics working paper

BMPI Heat Map (Interactive Version at
BitcoinIQ.info)
BitcoinIQ.info
Source: Hileman (2014) ‘Bitcoin Market Potential Index’, London School of Economics working paper.

Views on Bitcoin
Think of the cellphone. There were never more than 1.2
billion landlines. Then the cellphone came and we’re at 6.3
billion. Why? It’s not because only those people wanted to
communicate. The landlines were all post-pay. You need to
have credit to get one. The cell phones were pre-paid.
Suddenly you could get one with cash. It had nothing to do
with technology. It was an economic restriction. Now there
are 1.5 billion bank accounts, same threshold as land
lines. I think bitcoin will allow us to see 6.3 billion
people banking on their cell phones.
When people write the history of this thing, of bitcoin, they are
not going to write the story of 6 million to a billion. What is
truly remarkable is the story of zero to 6 million. It has already
happened! And we’re not paying attention! That’s incredible.
That’s what had one chance in a million and it already
happened.
“
“
”
Source: The Verge
Wences Casares
Xapo

Appendix - CoinDesk
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• If you have data you think should be included in future State of Bitcoin
reports, email stateofbitcoin@coindesk.com
• We also welcome any feedback you have on the report

Disclaimer
• CoinDesk makes every effort to ensure that the information in this
presentation is accurate and up to date. We cannot, however, accept
responsibility for any loss or inconvenience caused by reliance on the
material contained here.
• This presentation does not constitute financial advice or an investment
recommendation in any way whatsoever. It is recommended that you
perform your own independent research and/or speak with a qualified
investment professional before making any financial decisions.

State of Bitcoin Q3 2014

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State of Bitcoin Q3 2014