The Boring Bitcoin Report: Week of June 24

This week could pose a great buying opportunity for bitcoin
investors.  The US Marshal’s Bitcoin Auction will take place on Friday,
June 27, from 6:00 AM to 6:00 PM / ET and nearly 30,000 bitcoins are up
for grabs.  Since the announcement of this auction the price of bitcoin
has decreased and I expect the price to continue to decrease throughout
this week, due to speculators believing the sale will oversaturate the
market.

At the time of this writing, the price of bitcoin is at $590 on
CoinBase.  I predict a 20 – 32 percent price decline by Saturday, June
27, but I don’t expect the price to decrease below $400.

Harry Yeh of Binary Financial agrees:

We expect there to be some volatility and increased trading volume
this week.  There may also be some heavy selling pressure leading up to,
and on the day of the auction, causing the price to drop.”

Accredited investors also have the option of participating in
SecondMarket’s US Marshal’s Bitcoin Auction, which should be simpler
than direct participation in the government auction, but requires a 5
percent facilitation fee.  Order deadline is Thursday, June 26 at 12:00
PM / ET.

Here’s a summary of the not-so-boring bitcoin industry last week:

Government Initiatives:

Government Accidently Leaks Interested Auction Participants Emails

The US Marshal’s office accidently responded to an interested auction
participant’s email with about 30 other names CCed, revealing the
identity of all other people interested in bidding on the government’s
coins.  Since this email went out from the Marshal’s office, the CCed
interested participants began expressing serious security concerns,
while others took the opportunity to introduce themselves to some of the
bitcoin celebs on this list.

One person responded to the email chain saying, “wow, wow, wow did
the US Marshal just send a circular, well I suppose I’ll use this chance
to sell my band,” which was followed with a link to a music video.

Another person replied, “This just wreaks of incompetence.”

This auction is expected to be the most widely watched bitcoin sale
in history and the government has already given the media something to
write about.

Canada Passes Budget With Bitcoin Provisions

Last week Canada passed a budget implementation bill,
which included several provisions that will affect bitcoin commerce. 
According to attorney Christine Duhaime, the most important aspects
include anti-money laundering reporting requirements that look onerous
and could hinder bitcoin businesses in Canada.  The anti-money
laundering laws were first largely written in the 1970’s, before the
internet.  If Canada is trying to fit this transformative technology
into a box that was built for brick and mortar financial institutions,
it simply does not make sense.

Bitcoin Banned in Bolivia

With intentions to protect the purchasing power of the boliviano, the
country’s central bank says it is illegal to use any kind of currency
that is not issued and controlled by a government.  Bolivia is the first
country to issue such a ban.  However it is not clear how the country
plans to enforce this, since it would be difficult to do so unless they
turn off the country’s internet access.

The ban may be used to stop the rich from hiding their wealth in
bitcoin.  The effect probably will not have much impact on the bitcoin
market price because Bolivia is not a major player in this space.  As
one of the poorest countries in Latin America, bitcoin could have helped
raise the standard of living in Bolivia by bringing basic financial
services to the under-banked.

Industry Analysis:

ESPN Welcomes the Bitcoin Bowl

BitPay announced last week that they are sponsoring the annual
college football postseason game played in St. Petersburg, FL.  Starting
December 26, 2014 the bowl will now be called the Bitcoin St.
Petersburg Bowl.  BitPay is the title sponsor for the next three years
through the 2016 game.

Tony Gallippi, BitPay Executive Chairman said, “Our goal is to
continue to move bitcoin into the mainstream, and sponsoring the St.
Petersburg Bowl offers us that opportunity.”

It is very strategic and honest of BitPay to use ‘bitcoin’ as the
title sponsor as opposed to promoting their own brand, said Matthew
Roszak, a Bitcoin venture capitalist, “the industry is in a thoughtful
and aggressive ‘educate the masses phase’ and this is a perfect
example.”

Bitcoin Security Startup BitGo Gets More Funds; Ex-Verisign CEO Joins Team

BitGo, which in April rolled out the first enterprise-grade “multi-sig” digital wallet to tackle widespread concerns about bitcoin theft, has attracted $12 million in fresh funding and signed to its board a pioneer in e-commerce security.

In a press release, the bitcoin
security startup said the new Series A round investor was led by
venture capital firm Redpoint Ventures and included contributions from
Radar Partners, Founders Fund, Barry Silbert’s Bitcoin Opportunity Corp.
and Ashton Kutcher’s A-Grade Investments. Previous investors
Bridgescale Partners, Jeff Skoll, Bill Lee, and Eric Hahn participated
in the round.

Radar Partners’ Stratton Sclavos, a former CEO of Internet certificate authority Verisign Inc.VRSN -0.29%,
will join BitGo’s board along with Redpoint founding partner Jeff
Brody. The involvement of Sclavos carries symbolic significance for
BitGo, which in the words of its Chief Executive Will O’Brien, has
“ambitions to secure the world’s bitcoins.” It’s also relevant to
bitcoin more broadly, with the general public still wary of trusting a
digital currency and payment technology that has been subject to massive
losses and some troubling hacking attacks.

Early in Mr. Sclavos’s tenure at Verisign, the company used the
Internet’s Secure Sockets Layer encryption tool, better known as SSL, to
develop an authentication system for e-commerce web sites. This led
Verisign to became the Internet’s leading certificate authority in the
mid-1990s, its ubiquitous logo emerging as a de facto stamp of trust.
Along with similar services by other firms, this encouraged people to
start making payments over the Internet. Mr. Sclavos left the firm in
2007 and it was later sold to Symantec Corp.SYMC -0.09%

Mr. Sclavos says he was struck by the similarities between those
early days of the Internet and bitcoin’s current development phase, as
its backers try to build legitimacy and encourage mainstream adoption.

Back in mid-1990s, when Verisign was founded, “you had millions of
browsers downloaded and tens of thousands of web sites but you really
had no idea where you were going or who was behind the web sites,” Mr.
Sclavos said in an interview.

“This seemed to us incredibly similar to bitcoin, which is still in
the wild, wild west phase, still volatile, [people] not being sure
exactly who to trust and what is happening with bitcoins in a wallet and
where they are going if something goes wrong . to now having BitGo
there to create a trusted infrastructure, using standard technology.”

In April, when the bitcoin community was still roiling from news that
now defunct exchange Mt. Gox had lost 850,000 bitcoins, worth around
$500 million at the time, BitGo rolled out BitGo Enterprise, the first
digital wallet that uses “two-of-three” multi-signature technology as an
added layer of protection.

Under this arrangement, digital coins cannot be released from a
wallet unless two of three private keys – the unique alphanumeric codes
used to digitally “sign” encrypted transactions – are applied to it. For
each wallet, BitGo generates three different keys, one that’s attached
to the live, online wallet and controlled by the owner, one that’s held
in an encrypted format by BitGo, and a third that’s held offline in
so-called “cold storage” by the owner. That way, if owners want to take
complete charge of their bitcoins without requiring the engagement of a
third-party institution, they can do so. But under all other
circumstances, the engagement of the firm’s second online key helps
ensure the speed, efficiency and security of transactions.

In an interview, Mr. O’Brien said in addition to marketing its BitGo
Enterprise wallet, his firm is now reaching out to businesses that use
bitcoin and offering them a chance to use its multi-sig platform in
their own wallets and internal protections.

He sees this specialized service in keeping with where the bitcoin
economy will head “in parallel to the way the Internet developed.”

“Now that the Internet has matured you don’t have everyone operating
web servers, or operating systems or operating languages. There’s
specialization that takes place along the way,” Mr. O’Brien said. “That
way the entrepreneurial system can move faster, build on top of what
other companies have developed and build on top of standards.”