6 Big Things You Need to Know About Bitcoin This Week
Mt. Gox is history. Flexcoin flatlined, too. Hackers are stealing Bitcoin like crazy. Yup, Bitcoin is looking shadier by the minute. So much so that a Silicon Valley startup wants to bury it underground Fort Knox-style.
The controversial cryptocurrency has taken blow after blow this week, including some harsh burns from Goldman Sachs and Warren Buffett, but it’s not all bad news. The price of a single Bitcoin, though only worth about half of when it peaked at more than $1,200 last December, held steady around $628.49 at the time this article published.
Here are six major developments about the world’s first digital cash making headlines (and fueling rumors) right now:
1. Bitcoin underground storage startup Xapo closes $20 million in Series A funding. The Palo Alto, Calif. firm announced the venture capital infusion, led by Benchmark with additional backing from Fortress Investment Group and Ribbit Capital, on its blog. According to TechCrunch’s John Biggs, the Bitcoin “vault” company founded by payment industry veteran Wences Casares, aims “to build an FDIC for BTC.”
With the recent fall of Mt. Gox, swiftly followed by the collapse of Flexcoin, concerns that cyber thieves could steal Bitcoin holdings is understandably rife among Bitcoin investors. Xapo offers to ease their worries by locking down their virtual currency investments in some interesting new ways -- put simply, by encrypting them, copying them “onto external drives and paper” offline, then distributing the data to several different secret underground locations, reportedly including a mountain patrolled by armed security guards.
Related: 6 Bitcoin Basics for Beginners
Xapo charges an annual fee of 0.12 percent for every deposit. If by chance a hacker makes off with the BTC you safeguard via Xapo, you’re still covered. Meridian Insurance fully insures the company’s cold-storage vault and wallet.
2. Goldman Sachs slams Bitcoin, declaring it’s not a currency. The global investment firm issued an exhaustive 25-page research report that completely knocked the wind out of Bitcoin, saying the volatile virtual cash “can’t work as a currency.” But it “could hold promise.”
Goldman Sachs’ analysts didn’t mince words in saying that Bitcoin is too unstable to hold its own as a true alternative currency.
“We would argue that Bitcoin, and other digital currencies, lie somewhere on the boundary between currency, commodity and financial asset,” the report reads. “Our best definition would be that it is currently a speculative financial asset that can be used as a medium of exchange.”
3. The Commodity Futures Trading Commission (CFTC) considers regulating Bitcoin. The U.S. derivatives regulator is reportedly giving serious thought as to whether it “has the authority to regulate” the cryptocurrency and similar alternative digital currencies, according to Reuters.
The CFTC’s acting chairman Mark Wetjen said earlier this week at a futures industry conference that the CFTC “is looking into” if it could potentially regulate Bitcoin. “It’s been initiated,” he said. “There’s been an internal discussion at the staff level.”
Wetjen’s comments come only a week after Japanese officials announced that they were considering regulation that would tax Bitcoin transactions and bar banks and securities firms from dealing with cryptocurrency as part of their core business.
Related: 3 Big Misconceptions About Bitcoin
4. Wall Street tech companies debut global Bitcoin trading platform. Wall Street tech companies Atlas and Perseus Telecom this week jointly launched a new high-speed Bitcoin exchange platform in New York, Singapore and Hong Kong. According to The Wall Street Journal, the trading platform is designed to “facilitate trading in the digital currency by high-frequency trading firms and other large financial institutions.”
5. Hong Kong’s first Bitcoin ATM launched today... and another one launched just hours later. Lamassu went live today with another Bitcoin ATM, beating competitor Robocoin to the punch. The one-way Bitcoin dispensing unit is the first of its kind in the “Pearl of the Orient” city. The ATM is located inside a Chinese pancake (Beijing crêpe) restaurant and cafe in a bustling Hong Kong pedestrian district. Not long after Hong Kong’s inaugural Bitcoin machine went live, ANXBTC, a bitcoin exchange headquartered in the city, reportedly debuted a similar ATM.
6. Warren Buffett buffets Bitcoin on national TV. The world’s second richest man blasted the virtual currency as “just a joke” on CNBC’s “Squawk Box” today and warned people to “stay away” from it because, in his opinion, it’s merely a valueless “mirage.”
The Berkshire Hathaway CEO did, however, say Bitcoin is an efficient way to transfer money, similar to a paper check.
"[Bitcoin is] a method of transmitting money,” Buffet told Quicken Loans founder and chairman Dan Gilbert on the show. “It's a very effective way of transmitting money and you can do it anonymously and all that. A check is a way of transmitting money, too. Are checks worth a whole lot of money just because they can transmit money? Are money orders? You can transmit money by money orders. People do it. I hope Bitcoin becomes a better way of doing it, but you can replicate it a bunch of different ways and it will be. The idea that it has some huge intrinsic value is just a joke in my view."
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