Bitcoin Seeing Incredible Growth of Innovation, Says Analyst

February 18, 2014 10:42 AM EST
Those interested in tracking the progress of bitcoin should watch the innovation, not the price, thinks analyst Gil Luria of Wedbush. In a research note, he noted incredible growth over the last few months and signs of price stabilization, both positive trends for the crypto currency.

"Users continue to flock to Bitcoin, as evidenced by the number of wallets on Coinbase eclipsing 850K (adding >200k users YTD) and wallets nearing 1.2 million. Merchant adoption has also been on the rise, with >25K locations as merchant acquirers such as BitPay have streamlined bitcoin acceptance," said Luria.

"More important, we see signs that entrepreneurs and developers are swarming to the bitcoin platform. We see this as the best indication of the potential for bitcoin as these developers are allocating their most valuable resource - development hours. We found nearly 3000 Github repositories, double from six months ago, which was double from the previous six months. We believe nearly $86 million of venture funds have been invested in bitcoin companies, mostly over the last 12 months, which does not include the >$200 million and counting we believe have been invested in mining equipment," continued the analyst.

Regarding price stabilization, Lauria pointed out that Bitcoin has declined less than 15% even though its oldest exchange and others were crippled following a broad denial of service attack.

"We postulate that even 6 months ago, the consequences to Bitcoin prices from these types of events would have been far more dire. We expect the start-up payment network to continue facing these challenges, but believe newer exchanges such as Kraken and the ones we expect from Buttercoin will be better equipped to prevent assaults based on transaction malleability. This should, in turn, help reduce volatility further. Until then, merchant acquirers such as Bitpay, Coinbase, GoCoin and Circle will offer to shield merchants from current volatility," he added.

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