Coinsetter, a New York based firm has announced that they have received their first round of outside funding as the company is planning to launch a levered bitcoin forex trading platform. The seed investment is from Barry Silbert, CEO and Founder of SecondMarket, and Jimmy Furland, a London based tech entrepreneur. Silbert’s investment is through his new Bitcoin Opportunity Fund. According to Coinsetter the platform will provide users the ability to buy and short bitcoins. This provides a step up from the existing bitcoin denominated accounts.
Coinsetter will soon be launching a levered forex trading platform for bitcoin that enables people to make levered trades on margin and short the bitcoin market. These capabilities are available in all mature markets but are virtually absent in the bitcoin space. Through its focus on security, transparency and a great user experience, Coinsetter will be working to make bitcoin more accessible to both mainstream and institutional traders. In an ancillary arm, Coinsetter will also offer the first scalable solution for accredited investors and institutions to earn interest on their bitcoins.
The investment comes as last month Silicon Valley VC Adam Draper, announced that his incubator, Boost VC was recruiting bitcoin related startups for its fund. Overall, we are now seeing a trend where deeper pocket firms are entering the field, and VC’s are beginning to draw out forecasts on how trading, merchant processing, or storing of bitcoins can become multi-billion dollar businesses. On their part, Coinsetter is led by Jaron Lukasiewicz, who formerly worked at private equity and investment banking firms, along with Marshall Swatt, part of Citigroup’s development team of their forex trading platform.
Looking ahead, some of the important factors that will affect prices is the amount of merchants offering acceptance of bitcoins, government involvement, and security (there are estimates that around 10% of bitcoins have been hacked/stolen)
For a great talk on bitcoins, Business Insider Founder, and someone who knows a lot about asset bubbles, Henry Blodget appeared on the news roundtable at This Week in Startups (you can go to the 54 minute mark when they start talking about bitcoins). Blodget provides the fundamental bullish argument for bitcoins.
Bitcoin is the perfect asset bubble – its really fun to watch since a lot of what is happening is similar to what happened during the dot.coms during the 1990’s, basically at its fundamental core conceptually, the bitcoin promise is very compelling. Which is, we need a GLOBAL CURRENCY NOW. It is extremely tedious and frictionful to deal with all these currencies. You want a single currency world-wide. People who hold currencies for long periods of time are incredibly frustrated that inflation takes away the value of it. The promise of bitcoin is that there is going to be a finite number of them, and that’s it. So it will store the value and everything else.
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All of that is really exciting to people who look at it conceptually and understand it. But then, you’ve got this thing that has suddenly broken out. I hadn’t paid attention to bitcoin until I was at a conference at the beginning of March and someone told me “Dude! You’ve got to understand bitcoin.” He explained to me how it works and we passed around $100,000 of bitcoins from smartphone to smartphone and it was all very exciting. At that point, bitcoin was trading at $35, and now we are at $140 (climbed to $250 since the interview). There is no way to value it, and if it is really finite, and the government doesn’t make it illegal, or there is no way to counterfeit it, or hacking into wallets and scaring the heck out of people. There is a lot higher that the price of bitcoin can go because how can you determine its value, how do you value a currency that is a finite currency with no government meddling? And is increasing accepted around the world, it’s all very exciting.
Well, that’s my view. It’s conceptually very interesting and we are in the beginning stages of what could be a massive asset bubble.
The take away from his explanation, is that there is no fundamental reason why a global digital currency can’t work, there may be problems, but a meaningful foundation is in place.
When asked about why would people in Cyprus not want to use them after losing money with their banks, Blodget added
The biggest risk to bitcoin now is government involvement. There are rules to creating tender. If it really gets cranking and people start using it and trading it, the governments may take a look at it and decide that its illegal. And then suddenly you’d have the price drop from quadzillion, or wherever it is to zero overnight.
I think there will be governments looking at it. But if you got hosed by your bank in Cyprus, than definitely it will be interesting.
The next part of the talk speculated on what would happen to prices if suddenly we see an announcement that Facebook would start accepting them for gift giving, or Sqaure added it to their payment features. Basically, adding acceptance of few brand name firms could instantly surge demand prices would be in the thousands. It’s worth viewing the whole 10 minutes to hear the back and forth.