Publishing their latest newsletter to investors, Pantera Capital has stated that “Venture capital will drive bitcoin growth”. The essay is part of their overall research which covers recent developments in bitcoins over the past month as well as technical and fundamental analysis. Last month’s research was notable for presenting further bullish forecasts for bitcoins despite a month long rally having already taken place.
This time around, Pantera is focusing on the emergence of venture funds into the sector. The timing of the report couldn’t be more opportune as it was distributed just as Xapo had made public that it secured $20 million in new funding. Pantera Capital themselves has also been responsible for a portion of the growth in investing, having led a $600,000 seed round in BitPagos. According to Pantera’s estimates over $250 million in funding has been reported for 2014, compared to $88 million in 2013 and $9 million in 2012, adding that the investments have gone to “funding a minimum of 3,592 Bitcoin projects around the world, almost three times one year ago”.
Explaining the rationale behind the investments Pantera pointed to innovative and disruptive features of bitcoins such as, “bitcoin is built for the internet”, “that it directly attacks areas of the economy which enjoy monopoly profits”, and its ability to provide banking and a store of wealth in areas lacking strong financial infrastructures and or stable government backed currencies. As a result of the funding, it creates services and solutions for the use of bitcoins. With a hard-cap on the amount of available bitcoins, the increase demand due to venture backed innovation provides a fundamentally backed proposition for higher prices of bitcoins according to Pantera Capital. The venture driven thesis concludes by returning to an earlier analogy of bitcoins to TCP/IP technology of the early 90’s, stating:
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We believe the TCP/IP analogue is great. If you saw that protocol’s promise you had no direct investment opportunity. You couldn’t buy a chunk of TCP/IP. Investors could only buy proxies – like Pets.com. Bitcoin may be unique in offering investors a direct stake in the protocol. Bitcoin investors own a piece of what may be the future payment rail – not just memories of Sock Puppet.
The research report also announced the launch of the Pantera BitIndex. Measuring seven data points, according to Pantera Capital, the index isn’t meant as a short term predicter of price movements, but one that is expected to forecast medium range movements of bitcoin prices. The seven data points are:
- Developer interest on GitHub
- Merchant adoption
- Wikipedia views
- Google searches
- User adoption as measured by wallets
- Transaction volume