Bitcoin Venture Capital Investments Soar 28% on Increased Optimism

Venture capital investment in bitcoin increased 28% sequentially in the second quarter, signalling investors' increased enthusiasm and confidence in crypto-currencies.

CoinDesk's State of Bitcoin report for the second quarter showed venture capital investments in the digital currency totalled $73m (£42.6m, €53.6m) in the second quarter, up 28% from $57m in the first quarter.

Including Xapo's $20m round in the early third quarter, total investments for the 2014 year-to-date period were at $150m. Since 2012, total venture capital investments in bitcoin have increased to 240m.

Bitcoin payment gateway BitPay's $30m round in May has been the largest venture capital deal involving bitcoin firms so far. BitPay currently serves more than 30,000 merchants, and is adding more than 1,000 merchants to its network each week as of January 2014.

The company, which processed more than $100m bitcoin payments in 2013, is valued at $160m after the latest funding round.

Bitcoin mining giant Bitfury's $20m round in May was the second-largest for the quarter.

CoinDesk is projecting a total of $284.5m investments in bitcoin start-ups in 2014, up from its earlier projection of $200m. At that level, venture capital investments in bitcoin would comfortably surpass the $250m invested in first sequence internet start-ups in 1995.

In addition, the 2014 run rate for publicly-disclosed venture capital investment in bitcoin start-ups would be three times more than the total investment made in bitcoin start-ups in 2013.

"The 'wall of money' flowing towards cryptocurrency start-ups continues to grow and will continue to have a positive impact on the industry's prospects," CoinDesk writes.

Bitcoin was launched in 2008 and is traded within a global network of computers. Virtual currencies are not backed by any country or central bank and can be transferred without going through banks or clearing houses, and without the associated fees.

The digital currency has faced a number of woes including the collapse of MtGox, which had been the largest bitcoin exchange, and the closure of online black market Silk Road, which was facilitating illegal deals for payments in bitcoin.

In addition, it is not regulated like other fiat currencies, and most countries have warned their consumers against using it.

Despite all these drawbacks, a large number of investors believe that bitcoin has huge potential.