January 7, 2016 - In This Issue:







2016: The Year Bitcoin Adoption Goes Mainstream?
If you do a Google search for "Bitcoin," one of the top results is still the 2011 Wired article "The Rise and Fall of Bitcoin," which focuses mostly on the then-falling price (it had dropped from almost $30 to under $5 in the months preceding publication). For most media pundits, the success or failure of Bitcoin is directly tied to the price of 1 bitcoin. The price, however, is simply the bellwether. Many other factors actually determine the longterm prospects for Bitcoin: merchant adoption, VC investment, usage by financial firms, etc. But the most important factor may be widespread user adoption. There are many indications that 2016 will be the year that Bitcoin breaks into the mainstream.

Mainstream adoption of any currency requires simplicity and ease of use in obtaining, storing, and spending the currency. If any of these three activities are difficult for the mainstream user, then the currency has significant hurdles to widespread adoption. (For purposes of this article, a "mainstream user" is one who is not particularly technically literate, but can use a smartphone and/or desktop computer with no real difficulties). Over the past few years, the Bitcoin ecosystem has been addressing these challenges, and 2016 looks to be the year it will overcome them.

Financial World Warms Up To Having Bitcoin In Their Portfolio

It was an eventful long weekend for Bitcoin. On ChristmaIs Day, it reached a symbolic milestone when the 100 millionth transaction was recorded on its network.

The number of transactions per day has been steadily growing over time. The phenomenon is interpreted by some as evidence of the increasing adoption of Bitcoin, though most of the transactions are not commercial in nature.

During the past year, the growth profile is slightly steeper than linear; the count nearly doubled. Over a 5.5-year period, the total increased 100-fold.

Cryptocurrency Is The Future Of Lithuania's Economy
Bitcoin is a cryptocurrency, which was created in 2009 by an unknown programmer or a group of them. It is peer-to-peer money transfer open source software, which has no central regulator.

There are many skeptics about Bitcoins, but Ilja Laurs, entrepreneur and founder of "Nextury Ventures" Venture Capital fund, believes this is just another kind of currency: "Bitcoins are real money. You can see it as a really secure protocol and money is just one of the usage of it." Since this currency is based on very complex mathematical algorithm, it is pretty safe to say Bitcoins are more secure than your email account.

Mr. Laurs also presents a few reasons why it is the perfect time to talk about Bitcoins, as nowadays existing currencies are not compatible with fast and rapidly changing IT innovations. We were taught that banks might be the most secure place to hold your money. Lehman Brothers case proved us wrong. Practically speaking it is extremely easy to get your credit card details stolen or hacked. Anytime paying in a restaurant a waitress could take a picture of your credit card details and order anything online. Additionally, money transfers from one country to another takes several days and with a charge of approximately $50. In 2016 it should be managed in only a few seconds, with a minimum of effort and cost only.

Why Bitcoin Matters

The most epochal financial transaction of this century, to date, occurred on May 22, 2010. It did not involve Wall Street, or the City of London; it took place in Jacksonville, Florida. It did not feature collateralized debt obligations, or credit default swaps. It was a purchase of two Papa John's pizzas, in exchange for a payment whose present value currently exceeds US $4 million.

But the most remarkable thing about that transaction was the decision by the provider of the pizza, 18-year-old Jeremy Sturdivant, that the compensation he received-10,000 units of a newly birthed currency, one called into being from the ether of the Internet, and backed by no bank or nation-was worth real bread and cheese. Those pepperoni pizzas were the first real-world bitcoin transaction.


As global markets flounder, Bitcoin rockets up 6%
Bitcoin, the world's most popular digital currency, has skyrocketed despite a floundering global market.

The currency dipped to $312 in November - after jumping more than 70 percent in October to $410 - but has steadily risen to more than $450 in the last two months.

U.S. stocks, on the other hand, opened sharply lower Thursday after continued overnight volatility in China.

Bitcoin is a relatively illiquid market, so its price is highly volatile.

For comparison, gold is up 1 percent, but is down 10 percent compared with this time last year.

Thought Bitcoin Was Dead? 2016 Is the Year It Goes Big
BITCOIN WAS GOING to change the world until it wasn't. But now it is again.

Oh sure, you've heard this before. Back in 2013, everyone was sure bitcoin was the next big thing. Then the world's largest bitcoin exchange, Mt. Gox, imploded, and everyone was sure bitcoin was dead. Pundits tend to think that way: you're It, or you're not. The reality of it is a little different. Despite the travails of Mt. Gox-and the Silk Road, the online drug bazaar that relied so heavily on bitcoin-the digital currency never went away. Today, it's thriving like never before. And some say this is the year it finally reaches the mainstream.

As a currency driven not by a central government but by a vast network of independent computers spread across the globe, bitcoin has been slowed by regulatory problems-particularly in the US. But these are easing, with regulators in New York leading the way. Ultimately, bitcoin can still provide a much cheaper and simpler way of moving money from place to place, particularly when you're a consumer or business moving it across international borders or a retailer accepting payments from online buyers.

Accept It: The Blockchain Will Be Part of Your Bank's Business
You've heard the hype.

But you recognize that most of it is coming from people with a vested interest in seeing blockchain technology become the big thing that they think it will be - Blythe Masters, for one.

The JPMorgan Chase veteran is the chief executive of the blockchain technology company Digital Asset Holdings. So you have to expect her to talk up the blockchain as she has, tout its potential to change the way the financial world operates, emphasize how it can reduce risk, improve efficiency and ultimately provide better customer service.

Among traditional bankers, some might agree there's great potential in technology that facilitates an immutable record of transactional data.

Why bitcoin's tech could 'change everything' for banks
Bitcoin may have risen over 35 percent so far this year, but it's the underlying technology behind the cryptocurrency that is exciting the world's major banks.

Called the blockchain, it has been heralded as a potentially disruptive force in finance by major institutions, which claim that bitcoin is just the "opening act" in something bigger.

Bitcoin may have risen over 35 percent so far this year, but it's the underlying technology behind the cryptocurrency that is exciting the world's major banks.

Called the blockchain, it has been heralded as a potentially disruptive force in finance by major institutions, which claim that bitcoin is just the "opening act" in something bigger.

2015 Bitcoin Year in Review

In December 2014, the Bitcoin network averaged 86,038 transactions per day. In December 2015, the Bitcoin network averaged 202,869 transactions per day (as of 12/23/15). This means that daily transactions on the bitcoin network more than doubled (136% growth year over year) in 2015.

Despite the strong growth in transactions, no single use case has broken out to the mainstream. This is something to keep an eye on in 2016 and beyond.

Volatility has been on the decline since bitcoin's inception. In 2015, bitcoin volatility fell by 21%. More specifically, the bitcoin vs U.S. dollar exchange volatility (trailing 30 day average) fell from 3.98% to 3.15% this year. You can see some of the more volatile government backed currencies this year in the graph above for comparison.