It’s been a lackluster year for the price of bitcoins. In a few days, fans of the fledgling digital currency will come face to face with a reality that few would have thought possible at this point last year: in a one year time-frame, the price of a bitcoin has fallen.

This has been a stunning turn of events for an asset that saw extreme price growth at the end of 2013, quintupling in value during November of that year. While many in the community believed at the time that this signified a bubble waiting to pop, it was also a widely held opinion that the price would continue its historical growth pattern once the hype faded. The belief was so strong, some even made terrible bets on the matter.

Unfortunately for them, predicting the price movements of a largely unregulated, brand-new type of financial market proved to be surprisingly difficult. Instead of continuing on its previously upward trajectory, the price of a bitcoin slowly but steadily trickled downward over the course of 2014, and today sits in a familiar spot to where it was a year ago.

Critics of the digital currency might say that the falling price signifies a lack of demand and that this proves what they have been preaching all along: the Bitcoin experiment is an answer looking for a solution, something that is interesting in theory but worthless in practice because people are happy with the money they are used to.

However, supporters have countered by turning to different metrics for judging the growth of the Bitcoin network. On October 7th, Fred Wilson, a venture capitalist who was one of the first people to invest in Coinbase, shared a slide on his blog AVC highlighting positive adoption metrics for the past year. And on November 2nd Balaji Srinivasan, a Stanford computer science professor and partner at Bitcoin-invested Andreesen-Horowitz, posted a series of tweets arguing that “institutional acceptance” of Bitcoin has been growing “exponentially.”

Srinivasan pointed out that, in his opinion, Bitcoin was “only fully legalized this year” thanks to the legitimization brought by government scrutiny. In the wake of the Senate hearings in November of 2013 and the ongoing BitLicense development from New York’s Department of Financial Services he believes that “entrepreneurs can finally build w/o threat of jail.” He added that there is “still regulatory risk, but vastly less than 12-18 months ago.”

Indeed, there has been an unmistakable interest in Bitcoin from the world of traditional finance over the past 12 months. Respected publications such as The Economist and the Wall Street Journal have begun to take notice, with the former calling the protocol’s design “ingenious and elegant” and the latter now running a column devoted to Bitcoin news entitled BitBeat.

Large private banks have also started to investigate the world of cryptocurrency. In February JP Morgan Chase published their report The audacity of bitcoin and Wells Fargo called a meeting in January with “finance executives, virtual currency experts and U.S. government representatives” to discuss “rules of engagement” with Bitcoin. Goldman Sachs has jumped on the analysis bandwagon as well and the U.S. Federal Reserve has weighed in on the issue multiple times.

But maybe the most promising sign of institutional acceptance comes from influential individuals who have begun talking about the promise that this technology could hold for society. Edmund C. Moy, former director of the United States Mint, published a paper in May called The Currency Revolution, Courtesy of Bitcoin in which he concluded “Bitcoin, and the ideas behind it, will be a disruptor to the traditional notions of currency. In the end, currency will be better for it.”

More recently, former SEC chairman Arthur Levitt joined the Bitcoin community via advisory roles for BitPay and Vaurum. Echoing Srinivasan’s hypothesis about institutional acceptance, he said what attracted him to the industry was the deep “brainpower behind Bitcoin technology and cryptocurrency.”

On October 29th, Levitt met with arguably the most important individual in the world of Bitcoin regulation: Benjamin Lawsky. The meeting took place four days before Lawsky’s keynote speech at Money 20/20 in Las Vegas where he announced a proposal for temporary BitLicenses meant to ease the burden of regulation on fragile start-ups.

In his speech, Lawsky praised the potential of Bitcoin, saying that:

“[A]fter we began looking into virtual currencies more closely, it became very clear to us that the power behind the technology is pretty amazing...at DFS we think that virtual currencies matter and we’re excited about the potential that they hold to improve our system in various ways.”

Of course, institutional interest could also prove to be harmful to the Bitcoin ecosystem. Despite Lawsky’s words of praise many in the community still believe that the BitLicense regulations will inevitably harm development by creating roadblocks to open innovation. Banks with deep pockets can also be expected to launch lobbying efforts against cryptocurrencies if they begin to see them as a serious threat to their business.

But these controversies aside, one thing is clear from the increasing consideration of Bitcoin by both private parties and governmental institutions: cryptocurrency, as an idea, is more legitimate than ever before. 


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