| Bitcoin turmoil puts big money, reputations on line | By William L. Watts, MarketWatch
So far, there's little sign big investors in bitcoin and bitcoin-related ventures are ready to abandon ship after the collapse of bitcoin exchange Mt. Gox, even as the fiasco triggers recriminations and new calls for regulation.
Suffice to say, the situation isn't welcome news for advocates of the virtual currency who have touted it as a long-term alternative to government-issued currency. One of their main arguments, after all, is that it is safer and sounder than currencies like the dollar and yen. Venture capital firms poured around $74 million into bitcoin-related ventures in 2013, according to CB Insights. Here's a guide to some of the biggest players.
Read about the Mt. Gox's CEO statement and how bitcoin prices are rebounding Wednesday.
Listen to Chuck Jaffe: What happens now if you hold bitcoin
-- William L. Watts @wlwatts
-William L. Watts; 415-439-6400; AskNewswires@dowjones.com
Marc Andreessen
Among the most high-profile bitcoin backers is Marc Andreessen, the co-founder of Netscape and general partner of venture-capital firm Andreessen Horowitz. That firm has made around $50 million in investments in bitcoin-related ventures, according to the New York Times. Andreesen personally holds only what paper described in January as a "de minimis" amount of the virtual currency.
Earlier this year, he penned a column for the Times's Dealbook site praising bitcoin as a piece of transformational technology with a bright future ahead, putting it on par with personal computers circa 1975 or the Internet in 1993.
Andreessen Horowitz led the largest bitcoin investment to date, a $25 million funding round for bitcoin wallet Coinbase, according to CB Insights. Andreesen Horowitz didn't respond to an email seeking comment on the latest bitcoin turmoil on Tuesday.
Andreessen, on Twitter, said Tuesday it was important to remember that every new technology, including the personal computer and Internet, also had birthing pains. "Our enthusiasm and commitment unchanged," he tweeted.
-William L. Watts; 415-439-6400; AskNewswires@dowjones.com
Winklevoss Twins
Tyler and Cameron Winklevoss last week launched the Winkdex, an instrument designed to establish the underlying value of a bitcoin, a calculation that was complicated before the latest Mt. Gox trouble by different values across various exchanges.
The twins, whose lawsuit against Mark Zuckerberg over the origins of Facebook was dramatized in the 2010 hit movie "The Social Network," popped back up on the radar screen when they announced last April that they had bought $11 million worth of bitcoin and then last summer filed papers with the Securities and Exchange Commission to establish the first bitcoin exchange-traded fund. Winklevoss Capital didn't respond to a request for comment on Tuesday.
-William L. Watts; 415-439-6400; AskNewswires@dowjones.com
Fred Wilson
The managing partner of Union Square Ventures, which counts Coinbase as a portfolio company, wasn't running scared on Tuesday. Writing on his blog, Wilson said the Mt. Gox woes were potentially a "sad day" for the bitcoin sector, but emphasized that the "wonderful thing about a globally distributed financial network is that if one of the nodes go down, it doesn't take the system down." He likened bitcoin's architecture to that of the Internet, with no "centralized control point" or "single point of failure."
Moreover, he noted that much of the venture capital pouring into the sector is going to infrastructure, which will help reinforce the ability of institutions to live up to their custodial roles. And he added that he "bought a little bitcoin" on Tuesday.
"Not much. But I always feel good buying when there is blood in the streets in any market. It is my favorite time to buy," Wilson wrote.
-William L. Watts; 415-439-6400; AskNewswires@dowjones.com
Michael Novogratz
The principal of hedge-fund firm Fortress Investment Group made headlines last fall when he said bitcoin was just starting to heat up. At a conference in October, he said he'd bought bitcoins a few months earlier. As bitcoin rallied in November, he told MarketWatch that prices would go higher and that it was just the third inning of a nine-inning game.
Fortune in December reported that Fortress was preparing its own bitcoin hedge fund. Novogratz didn't immediately respond to an email requesting comment.
-William L. Watts; 415-439-6400; AskNewswires@dowjones.com
Jim Breyer
Breyer, an early investor in Facebook Inc. (FB) and managing partner at venture capital firm Accel Partners, contributed to a $9 million funding round last October for digital currency company Circle Internet Financial.
At the time, Brewer said he was confident that "you will see major worldwide retailers adopting systems built on bitcoin." An Accel spokeswoman didn't immediately respond to requests for comment. Circle joined Coinbase and four other firms in issuing a joint statement pledging to safeguard customer security in the wake of the Mt. Gox situation.
-William L. Watts; 415-439-6400; AskNewswires@dowjones.com
Barry Silbert
Silbert, the founder of SecondMarket and the Bitcoin Investment Trust, a private trust for wealthy investors, sees a vacuum in the wake of the Mt. Gox fiasco. Silbert, who has invested in several bitcoin-related startups, told MarketWatch that he is in the process of creating a bitcoin exchange in close collaboration with regulators.
"[We're] doing this in a way where regulators are involved really from Day One," he said. The exchange won't be a SecondMarket venue, he said. Instead, Silbert plans to spin off SecondMarket's bitcoin business into a separate company and assume the title of CEO of both companies. There will be two business lines: The Bitcoin Investment Trust, and the bitcoin trading team, he said in an interview Tuesday.
"We're going to be contributing at least $20 million in cash," he said. If the rumors are true, the sooner that Mt. Gox goes away, the better for bitcoin, he said. -- Saumya Vaishampayan
More on bitcoin:
Mt. Gox collapse riles bitcoin users, spurs regulatory calls
David Weidner: How bitcoin could turn it around
Bitcoin exchanges try to soothe customers |
