Effect of Bitcoin Banking Crunch
QuickCoin is a self-funded Bitcoin company and their success has allowed them to capitalize even more than they initially did.
On 11th August, they had the first seed round capital connected to their official bank account at Wells Fargo. However, they could not celebrate for long.
Soon after San Francisco-based Company QuickCoin was launched in May, the self-funded company gathered attention by integrating with social networks like Facebook.
A wider group of audiences responded to them because of their involvement with the simple Bitcoin wallet technology.
Nathan Lands, CEO of the company informed in an interview that he first realized something was wrong when a few bills began bouncing because their debit card was declined.
He continued by saying that after a period of uncertainty, their bank account was shut down without any formal notice.
As a result to this, QuickCoin had to look for other options. Wells Fargo refused to comment on the topic with excuse of confidentiality.
Lands stressed that this event indicates a failure in the US banking system, failure to accept the Bitcoin industry and companies like QuickCoin.
Some very interesting matters surfaced when dug, in search for answers. It was found that some noteworthy investors think that it is exceptionally difficult for US startups to gain access to banking partnerships. There aren’t too many solutions to this problem.
A famous Bitcoin company suggested that QuickCoin involve with multiple smaller banks before settling in a stable partnership.
Jaron Lukasiewicz, CEO of Coinsetter, thinks that banks can be divided into 3 sections: those that are not open to Bitcoins, those that are in no way involved with Bitcoins but are willing to get involved in future, and those that accept and help Bitcoin companies.
The first section is what majority of banks are and the last one has only a handful banks in it.
Bill Tai, an investor, also thinks that the banks are biased against Bitcoin companies. A number of banks have a policy to suspend Bitcoin-related operations until they understand better.
Many important Bitcoin investors suggest that they realize was their value in the market is, but they think that the present situation poses challenges for their companies.
Brock Pierce is a board member of the Bitcoin Foundation. His Angel List syndicate had requested them to invest in 12 different Bitcoin startups in 2014, but they only invested in two startups so far. He described some scenarios to explain how banking for startups is rarely stable.
Many experts caution that banks are only in the process of learning about Bitcoin. Many of them might not be involved completely yet but they are aware of the increases popularity and potential of the system.
Wells Fargo informed that they are still learning more about crypto currencies and also about the associated rewards and risks.
Very few banks are willing to funds Bitcoin companies at present and if the relationship between banks and the companies continue like this, the startups will find it difficult to survive.
BTC Prices Drop
Following this decision, BTC/USD dropped on all exchanges and broke several supports in a row to evolve now around the $400 on BitStamp, after hitting a lowest at $378.
The volumes involved are significant and show the concern of the market.
As a consequence, most of other altcoins have been falling sharply as well.
The news from a Russian Draft Bill which could ban bitcoin use in the country may also add some strain on the market.
BitcoinVOX Analysts believe these news are overrated by the market, as some other banks are willing to use or already using digital currency technology and Russia has never been a substantial market. A lawyer told us recently : “someone will take the biscuit anyway”.
Other rumor in Wall Street claims that several huge investment banks are planning to invest tens of $ million in mining equipment in the coming weeks; thus the reluctance of the banking sector to deal with digital currency appears very relative.
At least around $400, this event is integrated in the trading price and we should more likely observe a rebound towards the $430 in the coming days, considering the BTC price to be very attractive at current level.