The six month chart keeps the higher prices in perspective but, even on that longer scale, there’s a definite leveling of prices around the $500 mark. It’s still too soon to say if this really is the floor for Bitcoin, but there’s no denying the deceleration in the downward trend — and that’s a win all on its own.
So far Bitcoin has been dogged by being technically difficult for the average person to understand, and a target for hackers, crooked businessmen, and skeptical regulators. With no intrinsic value, Bitcoin is getting some much needed institutional support from new players in the market backed by VC money. One of those new ventures, which hopes to transform Bitcoin into something that resembles a simple banking service, is called Circle.
Current Bitcoin applications require users have at least some understanding of public key encryption, and the system functions like an unregulated trading platform. That’s great for hackers, thieves, and sharp speculators, but it’s not so good for people new to the technology. What Circle has done is create a safe, universally accessible and, at least for the moment, free platform to make Bitcoin more approachable for the next tier of early adopters.
Circle’s co-founder, Jeremy Allaire, sees speculators leaving the Bitcoin market as a positive sign, believing Bitcoin’s value as a payment medium outweighs its value as an investment.
Circle is also working with regulators to ensure compliance with financial regulations, provide proper disclosure regarding risks, and create some level of consumer protection. Right now Bitcoin exchanges are mostly overseas, and there’s no structured environment to address issues like liquidity and liability. For early tech-savvy adopters, those concerns are largely irrelevant; but for Bitcoin to build the infrastructure necessary to attract business and a broader user base, those issues will have to be addressed — and that’s the focus of Circle, as described by Allaire in this interview with Bloomberg TV.
Circle addresses these concerns with a platform that insures deposits and complies with anti-money laundering regulations. Customers can deposit money into their account, and see it immediately converted into Bitcoins without any fees. The user interface also makes it easier to send and request money. Instead of marketing itself as an investment platform, Circle seeks to capitalize on Bitcoin’s frictionless exchange to drive the value proposition inherent in the technology.
In the current market dynamic, there is little incentive for consumers to slog through the technicalities and associated risks to pay for goods and services with Bitcoin. But if services like Circle can capitalize on lower transaction costs to provide merchants with incentive to use Bitcoin, that would be a big win for consumers and merchants alike.
Currently, companies like Visa and MasterCard sit atop every digital transaction flowing through our banking system, sucking off a percentage of every exchange; a stealth financial tax that manifests as higher prices. If merchants started offering Bitcoin users a discount by passing on the savings from lower transaction fees, that could drive much wider Bitcoin adoption and provide predictability in Bitcoin pricing, something that is acutely lacking in the market that exists today.
I put in a request to try a Circle account, and will report back with a detailed overview of how the system works in a future column.