An introduction to Bitcoin, it's price history and it's future potential.

1. Why buy Bitcoins?
An introduction by Coin4ce
January 28th, 2014
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2. What is Bitcoin?
The world’s first decentralized, peer-to-peer, digital crypto-currency
• Bitcoin is a new type of money that can be sent instantly through the Internet to
anyone, anywhere in the world, without restriction, and for free.
• Bitcoins are not controlled by any bank, government, or corporation; rather,
Bitcoins are created and transmitted by a network using a peer-to-peer, open
source distributed protocol, whose security is based on the immutable
mathematical laws of cryptography (digital signatures and collision-resistant hash
functions).
• Bitcoin is very similar to gold, since it can be traded, it can be used as a means of
saving, it exists in limited quantity (21,000,000), and it is created through a costly
computational process called mining.
• For a detailed review of what Bitcoin is, ask for a separate presentation on “What is
Bitcoin”.
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3. Why is Bitcoin important?
Bitcoin levels the financial playing field on a global scale
• As Bitcoin awareness and acceptance grows, it will help eliminate disadvantages
felt by people who currently lack access to a strong banking system and who have
no protection from currency fluctuation.
• As of January 23rd, 2014 Bitcoin’s market cap is above $10 Billion USD
• In June 2013, the market cap exceeded $1 Billion USD
• In June 2011, the market cap exceeded $10 Million USD
• Anyone in the world with internet access can utilize Bitcoin as a payment method.
• An informative, brief and simple video from Bitcoin.org: What is Bitcoin?
When asked about Bitcoin, Bill Gates said
"IT'S A TECHNOLOGICAL TOUR-DE-FORCE"
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4. Some Bitcoin Facts!
Bitcoin: two years later, from controversial to cool
• Many large and popular companies, such as Wordpress, Overstock.com, and
Okcupid now accept Bitcoin. There are over 30,000 merchants globally now
accepting Bitcoin. This number increases everyday.
• Many prominent Venture Capital funds like Founders Fund, Andreessen Horowitz,
Draper Fisher Jurvetson, and Liberty Ventures have invested in Bitcoin start-ups.
• The Bitcoin network generates more than 1,000 petaflops (1 exaflop) of raw
computing power. Tianhe-2, currently the world's fastest supercomputer, located at
the National University of Defense Technology in China, generates less than 60
petaflops. Titan at Oak Ridge National Laboraroty is the second largest at under 30
petaflops.
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5. Who is using Bitcoin and why?
Motivations of market participants
Individual Users:
Merchants:
Investors:
•
International settlements:
remittances to home
countries faster and cheaper
than wire transfers
•
Bitcoin Price Agnostic: can
eliminate currency risk by
converting straight to
USD/other instantly
•
Long term buy and
hold: retail investors
and users, institutions
entering market,
miners
•
Privacy reasons: Okcupid
•
•
•
Security: lower risk of ID or
CC theft by insecure 3rd party
sites or fraudlent vendors
Fundamental Demand:
follows user demand rather
than price runups/speculation
Professional traders:
hedge funds, high net
worth individuals, high
frequency
•
Short term buyers: new
traders, reactive to
hype cycle
•
Micro-transactions:
previously cost prohibited
•
Easier implementation: no
credit review or application
process
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6. Who is using Bitcoin and why?
The viral loop for market participants
Individual Users: need a better way to send money
securely, cheaply, globally, and privately. Unbanked
populations worldwide need a secure value transfer
system. Some users need to escape monetary
pressures/restrictions (i.e. Argentina, Cyprus).
Individuals
Merchants
Investors
Merchants: need users to pay for goods and services in
Bitcoin to save on credit card (or other payment system)
fees. Merchants get instant access to a global market:
banked or unbanked.
Investors: need fundamental non-speculative demand to
carry long term price appreciation. Continued investment
fuels user growth and merchant adoption. Users and
merchants are also investors when they choose to hold
Bitcoins rather than convert them instantly.
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7. Why you should use Bitcoins
It follows a viral adoption growth pattern
Exponential growth is organic/viral adoption – a natural phenomenon
Source: bitcoincharts.com
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8. Why you should use Bitcoins
Viral growth on a logarithmic scale
From October 10th, 2010, the price of Bitcoin (BTC) went from $0.10 USD/BTC to $1000
USD/BTC (on December 10th, 2013) – That’s an increase of 1,000,000% in 38 months
$1000 USD/BTC
$0.10 USD/BTC
Source: bitcoincharts.com
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9. Google Search Volume for “Bitcoin”
Two main adoptions waves
- This is a graph of people searching for “bitcoin” in Google - The search spikes directly correlate to the price spikes from the previous two slides -
2nd Wave
3rd Wave
1st Wave
Early Adopters
Source: Google Trends
Trough of Disillusionment
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10. Google Search Volume for “Bitcoin”
The geographic locations of the searches
The first adoption wave happened in the US, Europe, Russia, China, and Australia
January 2011 – Only early adopters know
about Bitcoin
Source: Google Trends
June 2011 – 1st widespread adoption
wave
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11. Google Search Volume for “Bitcoin”
The geographic locations of the searches
2nd adoption wave hits US, Europe, Russia, etc – Latam, India, Africa start their 1st adoption wave
Coin4ce
January 2012 – Trough of disillusionment,
price of Bitcoin hits $2 USD/BTC
Source: Google Trends
March 2013 – 2nd adoption wave
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12. Google Search Volume for “Bitcoin”
The geographic locations of the searches
Adoption is currently becoming more widespread
Many countries that previously never had an search volume are starting to learn about Bitcoin
Source: Google Trends
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13. The price evolution of Bitcoin
January 2011 – Only early adopters know about Bitcoin
Satoshi’s paper is released in 2009, Bitcoin starts trading at Mt.Gox in September 2010
Source: bitcoincharts.com
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14. The price evolution of Bitcoin
June 2011 – 1st widespread adoption wave
Bitcoin rises to $30 USD/BTC from $1 USD/BTC in three months.
$30 USD/BTC
Source: bitcoincharts.com
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15. The price evolution of Bitcoin
December 2011 – The trough of disillusionment
The price of Bitcoin hits $2 USD/BTC, rebounds to $7 USD/BTC
$7 USD/BTC
$2 USD/BTC
Source: bitcoincharts.com
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16. The price evolution of Bitcoin
March 2013 – 2nd adoption wave
After recovering from $2 USD/BTC, there’s a long period of steady demand-driven appreciation to
$20 USD/BTC before it goes parabolic in it’s second adoption wave
2nd adoption wave –
$250 USD/BTC
Back to $10 USD/BTC
Source: bitcoincharts.com
Back to $20 USD/BTC
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17. The price evolution of Bitcoin
Fall 2013 – 3rd adoption wave
After closure of Silk Road, price goes from $100 USD/BTC to over $1000 USD/BTC, led in large
part by demand in China and favorable sentiment from the US government
$1000 USD/BTC
Silk Road closure,
$100 USD/BTC
Source: bitcoincharts.com
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18. The third adoption wave is cooling
Number of 1st-time Bitcoin downloads from Sourceforge
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**Note this is only 1st-time users downloading the Bitcoin client, this
does not reflect how much current users are using Bitcoins**
Source: sourceforge.net
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19. Sentiment based cool-down analysis
Assuming Then = Now; Run-ups followed by cool down period
First Wave - run up to ~$30
Cool down to ~$2-8 range
Drop off ~70-90%
Source: bitcoincharts.com
Second Wave - run up to ~$250
Cool down to ~$65-100 range
Drop off ~60-75%
Third Wave - run up to ~$1200
Cool down to ~$500-900 range
Drop off ~25-60% (so far)
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20. Does Then = Now?
What’s different this time around?
Then:
Now:
• Bitcoin was controversial
• Bitcoin is cool
• Regulatory uncertainty
• FINCEN’s regulation is partially clear
• No VC backing
• Major VC backing
• Just US, EU, Russia, Australia
• Just techies, traders, cryptos, etc.
• Starting to go global: Latam, Africa,
Asia
• Starting to go mainstream in USA
• 1st/2nd education wave
• 3rd education wave
Conclusion: “Then” does not equal “now”, and so ….
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21. What’s a fair price to start buying?
Anything under $1000 USD/BTC? bullish:
Long term upside for Bitcoin is veryNow?
o Multitude of vested interests: major
VCs, heavy investment, confidence
o More educated: users and new
countries creating demand
o Better infrastructure: the ecosystem
continues to evolve and improve with
more start-up incentives
o Merchant adoption: is at an all time
high and growing rapidly
o Higher word-of-mouth: the network
effect causes accelerated adoption
o Track record: Bitcoin has a 4 year
track-record of consistent growth
How high could Bitcoin go in the long run?
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22. What’s a fair price to start buying?
Caveats to an aggregate analysis
The market cap of Bitcoin is only ~$10 Billion USD
- Very small in the world of finance - Government statements and other major news stories can influence short-term
prices significantly - Impossible to predict exact shocks from these items Over the long run, Bitcoin has
- Grown virally, and … - Returned to its fundamental value based on utility So what could be the long term value of Bitcoin?
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23. Long Term Value of Bitcoin
Value Transfer System = Global Currency Markets
o Daily global FX turnover is $4
trillion USD as of 2013
o Daily Bitcoin turnover is $100M
USD
o To capture 1% of the Forex
markets…
o Bitcoin turnover would have to
increase to $40 billion USD…
o This equals a 40,000.00%
increase from today
Source: http://bit.ly/1a3n6g3
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24. Long Term Value of Bitcoin
Store of Wealth = Money Supply, Assets, Gold
 Global known gold reserves = $7.35 Trillion USD
 Total fiat money supply globally = $68.34 Trillion USD
 Total known debt globally = $136.89 Trillion USD
 Global other assets (stocks, real estate, etc.) = $198.1 Trillion USD
 Total estimated Value of Global “Wealth” = $410 Trillion USD
 Current market cap of Bitcoin = $10 Billion USD
1% parity means Bitcoin’s market cap increases to $4 Trillion USD, ~40,000.00% from today
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25. Long Term Value of Bitcoin
What Bitcoin price does that correspond too?
 12.26 of 21 million coins exist today
 In 2016 there will be 15 million coins in circulation
• in 2025 there will be 20 million coins in circulation
 At 1% parity in 12 years, 2025, we have $4 Trillion/20 Million = $200,000 USD/BTC
At 1% parity, the price of Bitcoin could be $200,000 USD/BTC
o At 0.1% parity, the price would be = $20,000 USD/BTC
o Today’s price = under $1000 USD/BTC
o The price 38 months ago was $0.10 USD/BTC
What is the time horizon?
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26. Long Term Value of Bitcoin
What is the time horizon?
1st wave – Oct, 2010: $0.1 USD/BTC  July, 2011: $30 USD/BTC; that’s 300x in 9 months
2nd wave – Dec, 2011: $2 USD/BTC  April, 2013: $250 USD/BTC; that’s 125x in 17 months
3rd wave – Sept, 2013: $100 USD/BTC  December, 2013: $1000+ USD/BTC; that’s 10x in 3 months
??? 4th wave coming soon ???
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27. Long Term Value of Bitcoin
Value of the technology
• One thing that is important to consider is that the technology, innovation
and implications behind Bitcoin are fascinating.
• Many people focus too much on the price and not how world changing
the Bitcoin protocol can become.
• Take a moment to read this article from Marc Andreessen, co-founder of
one of the most successful Venture Capital firms of all time:
• “Why Bitcoin Matters”
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28. Risks facing Bitcoin
Threats to infrastructure: hacks, DDOS attacks, etc.
Leads to a lack of confidence.
o Growing pains: as more
companies develop Bitcoin
technologies, errors/bugs
could be made
o Nature of Bitcoin attracts
hackers: new technologies
attract top computer
programmers, both good
and bad
o Lack of liquidity and critical
mass in new geographies
Historic hack at Mt.Gox on June 19th, 2011 left BTC at 1
penny after a hacker stole credentials from a Mt. Gox
auditor
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29. Risks facing Bitcoin
Government Intervention: FINCEN has spoken and…
It isn’t vanquishing Bitcoin, but will
keep a close eye on it.
Could it?
o To shut down Bitcoin, you’d have
to shut down the internet
o Governments aren’t sure how to
handle Bitcoin, which can make
people uneasy
o Germany makes Bitcoins held for
more than one year exempt from
capital gains tax! 
Bart Chilton, CFTC Commissioner
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30. Risks facing Bitcoin
Moving into unknown technological territory
Core Bitcoin technology unknowns:
o A 1 exaflop+ distributed computing
system has never been seen before
o Current block chain size is 8GB … at
100GB, 1TB?
o Shadow hashes, 51% attack
o Quantum computing: D-wave sells
first to Lockheed Martin
D-wave Qubit Quantum Computer
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31. Risks facing Bitcoin
“Alt”(alternative) Coins are Rising – over 100 exist
o Technology evolves, trying to
replace older versions with
improvements
As of January 24th, 2014
Currency
Code
Value of money
supply
o The “concept” is here to stay,
which is
o math based currencies and
decentralized protocols
Bitcoin
BTC
~$9.88 billion
Litecoin
LTC
~$513 million
o What are the other crypto
currencies?
Peercoin
PPC
~$95 million
Nxt
NXT
~$70 million
Mastercoin
MSC
~$65 million
o Litecoin is the second largest
and was developed by Charles
Lee of M.I.T and Google
Source: coinmarketcap.com
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32. Coin4ce.com will monitor the risks
And advise clients on what to do and when …
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33. Greenfield opportunity in Latam for Bitcoin
Coin4ce will make it easy for people and businesses in Latam to buy, sell, and use Bitcoin. Our
services will:
• allow merchants to easily accept Bitcoin as a payment
• allow users to instantly buy or sell bitcoins via local banking / payment methods
• connect Latam to the global Bitcoin eco-system
• set the stage for mainstream adoption across the region
There are 590 million people in Latin America, ~67% Spanish speaking, ~33% Portuguese speaking
Instant Transactions | Wallets | Merchant Services | Investments
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34. Our Team
Adam Stradling: Founder and CEO
•
•
•
Former Co-founder and COO of Tradehill, Inc – largest US-based Bitcoin exchange
Founder of 4CE – 5 years exp in BFSI consulting and recruiting, Chile based
Co-founder of work4ce.me – Funded recruiting technology solution, Start-Up Chile
Philippe Camacho: Co-founder and CTO
•
•
•
PhD in Computer Science, U of Chile – Cryptology and Computer Security
Software Engineer and Agile Coach – 5 years experience building software solutions
Cryptography researcher, published in: RSA, Latincrypt, and more
Jacob Lundberg: Co-founder and Advisor
•
•
•
Equity Research Associate, Credit Suisse, New York
Notre Dame MBA (Investments focus) – analyst at the Investment Office
Lived / worked in Chile three years - Hispanic Studies undergraduate degree
Antonio Vera: Software Engineer
•
PhD in Computer Science, U of Caen,
France – Analysis of Algorithms
Austin DeLonge: Operations
Manager
•
5 years experience in FinTech
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35. Coin4ce Services
Brokerage, storage and management
Brokerage:
Storage:
Management:
•
Consulting: Why
should I buy
Bitcoins?
•
Education: How do I
safely access and store
my bitcoins?
•
Advisory: As things
change how do I know
what to do?
•
Access: How do I
buy Bitcoins?
•
Technology: What’s the
technology behind the
system?
•
Risk Management: Can I
hedge?
•
Trust: Who do I give
my money to and
why?
•
Liquidity: How quickly
can I move in and out of
Bitcoin? What is the
associated cost?
•
Protection: How do I
know I’m protected from
hackers, loss, damage,
etc?
Currently, there is no clear, consistent, and trustworthy source for management and advice
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36. Bringing Bitcoin to Latin America!
Email us to learn more
Adam Stradling: Founder and CEO | adam@coin4ce.com
Philippe Camacho: Co-Founder and CTO | philippe@coin4ce.com
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