Coinsetter Raises $500,000 For Bitcoin Forex Trading Platform & Why $2000/BTC is Fundamentally Possible

22 Comments

Coinsetter, a New York based firm has announced that they have received their first round of outside funding as the company is planning to launch a levered bitcoin forex trading platform. The seed investment is from Barry Silbert, CEO and Founder of SecondMarket, and Jimmy Furland, a London based tech entrepreneur. Silbert’s investment is through his new Bitcoin Opportunity Fund. According to Coinsetter the platform will provide users the ability to buy and short bitcoins. This provides a step up from the existing bitcoin denominated accounts.

Coinsetter will soon be launching a levered forex trading platform for bitcoin that enables people to make levered trades on margin and short the bitcoin market. These capabilities are available in all mature markets but are virtually absent in the bitcoin space. Through its focus on security, transparency and a great user experience, Coinsetter will be working to make bitcoin more accessible to both mainstream and institutional traders. In an ancillary arm, Coinsetter will also offer the first scalable solution for accredited investors and institutions to earn interest on their bitcoins.

The investment comes as last month Silicon Valley VC Adam Draper, announced that his incubator, Boost VC was recruiting bitcoin related startups for its fund. Overall, we are now seeing a trend where deeper pocket firms are entering the field, and VC’s are beginning to draw out forecasts on how trading, merchant processing, or storing of bitcoins can become multi-billion dollar businesses. On their part, Coinsetter is led by Jaron Lukasiewicz, who formerly worked at private equity and investment banking firms, along with Marshall Swatt, part of Citigroup’s development team of their forex trading platform.

Bitcoin Trading Since Feb 25, source: http://bitcoin.clarkmoody.com/

Bitcoin Trading Since Feb 25, source: http://bitcoin.clarkmoody.com/

Looking ahead, some of the important factors that will affect prices is the amount of merchants offering acceptance of bitcoins, government involvement, and security (there are estimates that around 10% of bitcoins have been hacked/stolen)

For a great talk on bitcoins, Business Insider Founder, and someone who knows a lot about asset bubbles, Henry Blodget appeared on the news roundtable at This Week in Startups (you can go to the 54 minute mark when they start talking about bitcoins). Blodget provides the fundamental bullish argument for bitcoins.

Bitcoin is the perfect asset bubble – its really fun to watch since a lot of what is happening is similar to what happened during the dot.coms during the 1990’s, basically at its fundamental core conceptually, the bitcoin promise is very compelling. Which is, we need a GLOBAL CURRENCY NOW. It is extremely tedious and frictionful to deal with all these currencies. You want a single currency world-wide. People who hold currencies for long periods of time are incredibly frustrated that inflation takes away the value of it. The promise of bitcoin is that there is going to be a finite number of them, and that’s it. So it will store the value and everything else.

All of that is really exciting to people who look at it conceptually and understand it. But then, you’ve got this thing that has suddenly broken out. I hadn’t paid attention to bitcoin until I was at a conference at the beginning of March and someone told me “Dude! You’ve got to understand bitcoin.” He explained to me how it works and we passed around $100,000 of bitcoins from smartphone to smartphone and it was all very exciting. At that point, bitcoin was trading at $35, and now we are at $140 (climbed to $250 since the interview). There is no way to value it, and if it is really finite, and the government doesn’t make it illegal, or there is no way to counterfeit it, or hacking into wallets and scaring the heck out of people. There is a lot higher that the price of bitcoin can go because how can you determine its value, how do you value a currency that is a finite currency with no government meddling? And is increasing accepted around the world, it’s all very exciting.

Well, that’s my view. It’s conceptually very interesting and we are in the beginning stages of what could be a massive asset bubble.

The take away from his explanation, is that there is no fundamental reason why a global digital currency can’t work, there may be problems, but a meaningful foundation is in place.

When asked about why would people in Cyprus not want to use them after losing money with their banks, Blodget added

The biggest risk to bitcoin now is government involvement. There are rules to creating tender. If it really gets cranking and people start using it and trading it, the governments may take a look at it and decide that its illegal. And then suddenly you’d have the price drop from quadzillion, or wherever it is to zero overnight.

I think there will be governments looking at it. But if you got hosed by your bank in Cyprus, than definitely it will be interesting.

The next part of the talk speculated on what would happen to prices if suddenly we see an announcement that Facebook would start accepting them for gift giving, or Sqaure added it to their payment features. Basically, adding acceptance of few brand name firms could instantly surge demand prices would be in the thousands. It’s worth viewing the whole 10 minutes to hear the back and forth.


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22 Comments on this post

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  1. Matthew Carstens said:

    I still think governments will shut this down eventually b/c of AML issues, however until then and with the likes of CNBC and other major news portals constantly talking about Bitcoins its not a surprise to see firms taking advantage of the hype. Seems like an ideal marketing opportunity IMO – perhaps at least as a Binary.

    There is an API avail at Bitfloor: bitfloor.com/

    April 10th, 2013 at 1:59 pm
  2. Andy said:

    I would be interested on how this will work in practice. Will they deal in ‘physical’ Bitcoins, or will it be futures- or cfd-like trading? Will they act as agent and STP to something like mtgox, or will they do their own exchange, or deal on a principal basis?

    And how do you come up with an interest rate for bitcoins. As far as i understand it, bitcoins are more akin to a commodity (i.e. not interest bearing per se).

    April 10th, 2013 at 2:10 pm
  3. Ron Finberg said:

    will probably be CFD like – if its leveraged, than the margin is viewed as a loan, so interest charges can be charged

    April 10th, 2013 at 2:19 pm
  4. BigPiping said:

    Derivative’s are fun but this will be very interesting if you can fund and realise P&L in Bit’s.

    April 10th, 2013 at 4:06 pm
  5. Jon said:

    I knew that BTC would eventually take off. We’re all waiting for BTC/USD currency pair. I’m sure if enough people emailed their broker about adding it, they would consider doing it.

    April 10th, 2013 at 6:13 pm
  6. Ron Finberg said:

    @Jon – imagine if they can get some API working and offer liquidity to brokers!! #overnightsensation

    April 10th, 2013 at 7:31 pm
  7. Ron Finberg said:

    Ok – so now we got our first real crash in two months as prices have fallen over 50% from today’s highs to $125 – we’ll soon get an idea of bitcoin’s staying power

    April 10th, 2013 at 7:53 pm
  8. Just Me said:

    Come on! Nobody is going to allow a bunch of techies (VC and whatever) to print their own money….its just not going to be allowed. For thousands of years the practice of minting is for kings and governments. It is currently tolerated because they are not important. This kind of business has absolutely no future! The minute they start to matter is the minute they will be closed…obvious.

    April 10th, 2013 at 8:41 pm
  9. Greg said:

    I don’t know of anyone calling their broker looking for BTC. I still can’t understand why anyone is investing in this right now.

    I’ll take the under at 6 months before BTC becomes irrelevant again. Congrats to Coinsetter if they can make a quick buck though.

    April 11th, 2013 at 12:08 am
  10. paul said:

    bitcoin, gangham style and harlem shake. what do all 3 have in common?

    All fads which we will have forgotten about in 1 year!

    April 11th, 2013 at 8:44 am
  11. Andrew Saks McLeod said:

    On the other hand, it could lead to a dystopian, Orwellian cashless society…

    April 11th, 2013 at 8:51 am
  12. Ron Finberg said:

    Well – check out this link from nearly a YEAR ago forexlive.com/blog/2012/05/14/bitcoin-about-to-bite-the-dust/

    Scroll lower to see the author comment “I only acknowledge the existence of bitcoin so I can mock it.”

    Nearly one year, and 2000% later…..

    April 11th, 2013 at 8:54 am
  13. paul said:

    Andrew – In Cyprus we are a cashless society, but not in the way that Orwell imagined.

    Ron – It was a bit below the radar 1 year ago, so it didnt really catch any of the authorities eyes. But i think if it does become more popular might lead to more problems, such as regulation.
    Is it possible to ban the use of it in certain countries?

    April 11th, 2013 at 9:50 am
  14. Ron Finberg said:

    ” It was a bit below the radar 1 year ago, so it didnt really catch any of the authorities eyes.”

    So what does it have to with authorities? It’s like we are talking about fx and binaries with fake claims of profits and scams.
    Yes, you can buy drugs on silkroad or send money anonymously around the world. But the coins still have to be purchased with cash at this point. Those gateway points can be monitored.

    Just to be clear, I have no skin in this game and am ambivalent towards whether it continues to exist or not. But, the fact that it is seeing demand means that there is an audience for a digital payment solution. Look at paypal, they brought this massive innovation to the payment industry (they haven’t really continued to innovate, but that’s a side point) which has since been followed by hundreds if not thousands of firms.

    April 11th, 2013 at 10:29 am
  15. Andrew Saks McLeod said:

    @ paul – lol !

    April 11th, 2013 at 12:42 pm
  16. paul said:

    i just believe that it is just a bubble waiting to pop. It has lost 50% very recently. the majority of people did not get involved in it with and receive huge returns.
    Chances are they got involved when they have heard all the hype in the past few months.
    They will be in for a hard landing.

    April 11th, 2013 at 12:54 pm
  17. Andrew Saks McLeod said:

    Im on the fence on this one. It could become a payment medium and a way of avoiding euro haircuts as it is borderless. It is not a physical currency and therefore is not subject to restrictions by central banks. Ordinarily I would also agree and the idea of a cashless society is frightening to say the least but lets say the haircut goes ahead, that will set a legal precedent meaning it can be carried out anywhere in the EU and banks could impose withdrawal restrictions – under these circumstances bitcoins would not be subject to any restrictions and could even increase further in value as a “portable” currency… Orwell saw the cashless society (as did i till this happened) as a means of the powers that be controlling people, but in this case it could empower people..

    April 11th, 2013 at 1:23 pm
  18. aBaxs said:

    Bitcoin: first they ignore you, then they laugh at you, then they fight you, then you win

    We are now in stage two progressing into stage three.

    April 11th, 2013 at 1:32 pm
  19. Andy said:

    Looks like MtGox, the biggest bitcoin to USD market, has shut down trading for 12 hours to “let the market cool down”. Last traded px $120. Funny people. Meanwhile, on competing platforms its trading around $70 to $80.

    April 11th, 2013 at 4:05 pm
  20. Ron Finberg said:

    yeah- i think you were commented right as we added a post about it. Feels like the dot com days again

    April 11th, 2013 at 4:20 pm
  21. Jon said:

    @Andrew. There is an important distinction between the Orwellian cashless society and Bitcoin. Orwellian and popular conspiracy theorists promote the powers that be that want to control everything to remove cash and issue CREDIT. The cash still allows a sense of individuality/sovereignty/anonymity whereas credit always has a central authority.

    Bitcoins are decentralized and theoretically uncontrollable as long as >50% of the processing power of the blockchain is non-malevolent (see bitcoin whitepaper / threads on how bitcoin works)

    April 11th, 2013 at 8:58 pm
  22. Andrew Saks McLeod said:

    Jon I agree. I mentioned this in a previous comment. It is indeed different. Orwell predicted total government control by imposing a cashless society – Bitcoin may indeed empower people and therefore be a welcome instrument for trading, and avoiding overbearing central bank restrictions.

    April 12th, 2013 at 8:16 am

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