Coinbase, a Bitcoin exchange, is in talks for what could end up being the largest funding round ever for such a company, according to sources. The company is tipped in talks with possible investors for a funding round that may see Coinbase valued at more than one billion dollars, a new milestone for the cryptocurrency market if it proves true. What is spurring such massive figures? The similarly massive — and growing — demand for Bitcoin and other cryptocoins.
Information about the alleged talks comes from the Wall Street Journal, which reports that it got word from people familiar with the matter. Per those sources, Coinbase has experienced a big uptick in trading and traffic over the last several weeks, something spurred by Bitcoin’s renewed — and record — valuation. As we previously reported, Bitcoin’s value climbed back to the thousand-dollar mark in January, then quickly eclipsed it, blowing past its previous record high.
Critics downplayed the news, saying the uprise in value was a bubble that would soon pop (and that remains a possibility), but that didn’t stop people from buying Bitcoin. By March, the value of a single Bitcoin had exceeded the value of an ounce of gold for the first time, and investors both big and small took note.
Coinbase’s jump in traffic and trading is no doubt spurred heavily by the increased valuation, though the company was already dabbling in massive numbers by the turn of the year. Back in January, Coinbase announced that it had raised $75 million in funding from multiple big-name financial institutions, among them being USAA Bank and the NYSE.
Why are people flocking to Bitcoin and currencies like it over more traditional currency investments, such as gold and silver? That’s a tricky question to answer; indeed, there are multiple reasons people are spending their paper money on digital rather than metal, and some of them are more appealing to certain groups than others.
Bitcoin brings with it a promise of anonymity that is mostly unrivaled in the financial world, though that is slowly changing as the cryptocurrency grows in popularity. Such digital monies aren’t unfamiliar in the dark net markets, being a staple of Silk Road clones and other online stores where illicit goods flow. The currency isn’t limited to underground worlds, though, having become a viable payment option for a slew of companies and vendors, including Dell and Microsoft.
As the digital currency’s novelty wears off and its value grows, others are eyeing Bitcoin as a potential way to make money, as a bet against fiat currencies that may fluctuate more heavily or precious metals that, relatively speaking, aren’t seeing the same big jump in value. The fixed and highly transparent Bitcoin supply is one major element of appeal on the investment level, giving it a solid edge over gold and silver and other valuable items that don’t have such a solid and predictable rarity.
While gold, as an example, is a rare item, Bitcoin is more rare and quite a bit safer, at least from a fluctuation point of view. With certain other potential investments, the risk of overproduction or other inflationary issues remains, whereas with Bitcoin there’s a bottom of the barrel and everyone knows where it lies. Bitcoin is created in such a way that its value can be preserved, whereas gold is more volatile, and knowing this is comforting.
Of course, there are many reasons you may want to hold off on cryptocurrency investments, and they’re good ones. We’ve already seen some digital currencies rise and fall, including most recently Dogecoin with all its related drama, and there’s the ever-present short-term volatility investors have to contend with. On top of that, cryptocurrencies require a bit of tech savviness that some feel ill-prepared to offer, and likewise it is difficult to liquidate Bitcoin relative to other investments.
The fact stands, though, that many are choosing to buy their own bits of Bitcoin in the hopes that its value will grow, and many have already won big on these bets.