Why This Google-Backed Y-Combinator Bitcoin Startup is Closing Down
Buttercoin is turning off its services on April 10th. Current users have been advised to budge their bitcoins to another service and liquidate their dollar balances. The bitcoin exchange startup was part of the Y-Combinator batch YC S13 and backed by Google Ventures. The company has cited that with the dip in bitcoin interest among Silicon Valley investors, it wasn’t able to generate enough venture capital interest to proceed funding Buttercoin. The company was founded back in two thousand thirteen with the aim of targeting the global remittance market.
This is fairly a contrast to what some eminent silicon valley investors and global corporate influencers are telling:
Mark Andreessen had tweeted the following:
“In the brief run, Bitcoin is still very useful as a transaction and trust network in many uses cases even with high volatility. For example, payment applications of Bitcoin don’t require users/merchants to hold BTC for any period of time. All benefits still gained. Further, all other uses cases of Bitcoin and the blockchain are unhampered by [the] volatility of BTC. The system proceeds working just fine. What to see in 2015: Fresh apps, fresh use cases, international adoption, consumer education, technological innovation & spinoff ideas!”
A report was recently released by the Goldman Sachs Group, Inc. research division titled The Future of Finance: Redefining the Way We Pay in the Next Decade. The report primarily discusses the future influence of bitcoins. It highlights that bitcoins are expected to rise in popularity because the concerns around security have been addressed, thus obviating the need for security clearances.
Now let’s look at it this way. Maybe this startup is right? I searched through the Google trends from January two thousand thirteen until now and here is what I found:
As for the people who were using Buttercoin—should they be worried?
Buttercoin is taking the following measures to ensure settlement of funds:
- Dollar balances not liquidated will be sent back to the accounts they came from.
- Bitcoin balances in Buttercoin after April 10th will be converted to USD and sent to the bank linked to the Buttercoin account.
Buttercoin had raised around $1.Trio million by the end of 2013.
We have witnessed other bitcoin firms shutting down due to cyberattacks. For example Instawallet, which helped create Bitcoin wallets to store the currency, was shut down post cyberattack. What makes this case peculiar is Buttercoin’s mere lack of funds for investments. This particular case shows that the the industry is still conflicted about the interest in Bitcoin. Some investors are certainly developing growing skepticism about putting their money in bitcoin firms.
However, there is a silver lining to the dark cloud. Bitcoin has always been associated with a mixed bag of news. There is never a abate moment in this space. Coinbase recently raised $75 million in a funding round, which involved investors such as DFJ, USAA Bank, NYSE, Andreessen Horowitz, Union Square Ventures, and Ribbit Capital. This is the largest funding round yet for any bitcoin company and comes at a time when the cryptocurrency itself is facing very low trading rates. The participation of a financial institution like NYSE in this funding round shows that there is still hope for Bitcoin in the financial world. Former CEOs of Citigroup and Thomson Reuters have also invested in Coinbase.
As far as the specific case of Buttercoin goes, let me know your thoughts?