Although tomorrow the world’s first Bitcoin ATM will be installed in my new hometown of Vancouver, my former hometown Shanghai seems to be the first city where you can actually buy a new condo with Bitcoin. I am not sure if this is just a smart idea to virally promote the project, but a developer now sells small new apartments (42-81 sqm) in Zhangjiang, a hi-tech park area on the outskirts of Shanghai, that you can pay for in the crypto currency. They hope to attract Internet and tech people to live and work there.

The rate is not particularly good though, the developer set it at 1 BTC = 1000 RMB, which is about $164 right now, much lower than the actual rate of above $200 on Mt. Gox. But maybe he just set it a week or 2 ago, during Bitcoin’s fast acceleration? Although there are a lot of tech people around in Zhangjiang that are probably mining Bitcoin, I would be surprised if any of them have accumulated enough coins to buy an apartment.

But you never know, look at this guy in Norway for example. He wrote a thesis about crypto currencies in 2009 and bought for about $27 Bitcoins. He forgot about them and suddenly realized earlier this year that he still had them sitting somewhere in a virtual wallet. At that moment the Bitcoins were worth $885,000 (at today’s rate more than $1 million already), and he bought an apartment right away with part of the proceeds.

In my post yesterday I mentioned that I had noticed that the price increase in Bitcoins mainly takes place during daytime in China. That could imply that exploding exchange rate is mainly driven by Chinese demand. That theory was confirmed by a table from Bitcoinity that Justin Tsang sent me on Twitter today. The picture shows that over the past 3 days the largest Bitcoin exchange in the world is not Mt. Gox anymore, but BTC China!

Although over the past 24 hours Mt. Gox is bigger than BTC China again, I think this is quite significant for the Bitcoin economy. China is not only taking over the real world, but now also the virtual one. This is something fairly recent, because before I left China earlier this year nobody really talked about Bitcoin yet. Bitcoin is not mainstream yet, but with Baidu now accepting Bitcoin and BTC China being the largest Bitcoin exchange in the world, this is changing very fast!

This morning I woke up to see that the Bitcoin/US$ exchange rate is now above $200 for the first time since I started following the crypto currency. It’s almost scary to see how fast it goes up, but the more I learn about Bitcoin the more I think it’s purely demand based. I now have a dedicated Bitcoin app on the homepage of my iPhone and check the rate several times per day, trying to understand whether there is a pattern.

I have the feeling the rate goes up more in the evening/night Pacific Time, which is day time in China. This could mean that the current rally is mainly based on increased demand in China (next to increased demand elsewhere of course). So the short-term risk is not whether the US will ban the currency, but what China will do. I keep on being bullish, although I would not be surprised if their would be a temporary price correction after this huge rally, and will again add more Bitcoin to my portfolio today.

If you are still skeptical about Bitcoin (like most people at this stage), take a look at this wiki with myths about Bitcoin. Very useful information, especially if you are new to the currency.

Update: see below this post for an update that Jason sent out on October 30, 2013

In the early days of the Internet newsletters were quite common, but a few years ago they went out of fashion. But at least based on my own usage of them, they seem to be making a comeback, especially ones that curate news. There are a couple of them that I read daily, for example those of some newspapers (The New York Times), one about China (Bill Bishop’s Sinocism) and since a few weeks Jason Calacanis’ latest venture the Launch Ticker.

Even though I enjoy reading them I did not think I would ever be willing to pay for them. Well, in a way I pay for the NY Times one, because it incentivized me to take a subscription to the iPad version of the paper. Several of the others I subscribe to are actively trying to get people to pay, but I wasn’t sure how successful they were to get people to open their wallets. Some are regularly whining about the number of hours it takes to prepare a daily newsletter, others just have a daily ad in there trying to convince you to sign up for a paid subscription.

The threshold of paying is quite high for me, most information I get from newsletters I can also get from my RSS feeds, so why pay for it? I thought about this a lot, because I actually would not mind paying in order to get better content. And as an investor I always look for new or better ways to monetize content.

My conclusion was that I might be willing to pay for newsletters that would save me time (e.g. not having to go through all my RSS feeds) or would show me content that I would normally not see (e.g. translations from Chinese websites or newspapers). However, to stay with the above examples, I did not pay for either the Sinocism newsletter nor for the Launch Ticker, because they are both also available for free. Why spend money if you can get it for free, when there is no real benefit for paying?

But would I start paying if one of the newsletters suddenly would switch to a paid version only? Probably not, I was just not hooked enough to really miss them if they would not end up in my email box anymore. That’s of course a dilemma for content publishers: do you want a small number of subscribers who all pay or more subscribers who don’t pay?

Or is there a middle way? Today I realized there might be, because Jason convinced me to pay a monthly fee to get his twice-daily newsletters. How? Simply by still sending me 12 newsletters a week, but 3 of them with only the title and instead of the content a picture of a sad animal. That’s just genius, you see the headline (that’s normally inviting enough to open the mail) but then don’t get the content 25% of the time. Even though I probably would not pay if I would not receive any newsletters anymore, this method convinced me to put in my credit card details right away. As an added benefit I can now also comment on the Launch.co site, not a major feature but it feels good.

Too bad that the system did not work well yet: after signing up this afternoon I received a sad looking cat when I opened tonight’s email. I assume it’s just a technical glitch and that from now on the Launch Ticker will have only real content.

Great idea Jason, get them hooked and then slowly take the goodies away. I think this might be a good strategy for other newsletters as well and I hope you will share some of the results.

—

On October 30, Jason sent out the following update & strategy, probably interesting as a follow-up:

Quick update on our #sadpaycat strategy:

1. Every time we replace an email with the #sadpaycat about 25-100 of you become members. When we asked folks to become members in the past without replacing the content of the email we got 1-5. So, it’s at least 10-25x more effective to send a sad cat then ask you to subscribe. 

2. We are now at $2,500 a month in subscribers, or 30% of the budget of this research service. If we get 25 folks to subscribe each time it will take another 60 or so #sadpaycats to hit break even. That’s a lot of sad cats. 

http://launch.co/support

Possible strategy going forward:

a. 100% paid in email, free on the web: We’re thinking of making the email service only available to paid subscribers. 

b. 100% paid in email & web: we’re considering making this service only available to folks who pay. 

c. $10 a month / $99 a year price point: We’re considering making the product $10 a month / $99 a year. If you’re a professional $100 a year is nothing for the value this provides. If you’re broke any amount of money is a bummer. 

At the end of the day the LAUNCH Ticker is a year-long experiment that many important people tell me they love. The mass audience likes the product, the insiders love the product. 

As such we’re going to optimize for the insiders. This means we might run the service down from 20,000 folks a week consuming it to 2,000 paid folks paying $100 a year so we can have two or three full-time researchers. 

Last Friday I was at a Seraph Group conference in Half Moon Bay, south of San Francisco. During the day I talked with a lot of entrepreneurs and investors and I was surprised to see that even among this group most people did not know what Bitcoin exactly is. I don’t think I met anybody who had his or her own Bitcoin wallet.

That got me thinking, because I had assumed that Bitcoin would be more well-known by now in Silicon Valley. It’s actually good news, because it means the current value of Bitcoins (at the time of writing $158 on Mt. Gox, so 16% higher than during my last Bitcoin post and 60% higher since my first post about this currency in June this year) is still based on a very small part of the population understanding, holding or using Bitcoin. I keep on being extremely bullish on the virtual currency and keep on putting money into it.

Since my last post on September 9 quite a lot of things have happened with Bitcoin, the most important being the shutdown of the ‘secret’ website Silk Road (secret in the sense that you had to use Tor to be able to see it, so most people had no access to it). Silk Road was the number one marketplace for illegal goods such as drugs or weapons, and people paid in Bitcoin. The moment the closure was announced the value of Bitcoin dropped to about $100 on Mt. Gox, but within a few days the value was back at the pre-Silk Road exchange rate of about $140. This was an important fact, because it means that illegal activities like Silk Road are not the main reason why people use Bitcoin anymore.

Not only that, it’s also good that Bitcoin will be less associated with shady business deals. It now has the chance to be taken more serious, instead of being seen as something that’s only used for illegal things. Looking back I am happy Silk Road was closed, it was a scary but defining moment for the currency.

Another interesting development is that SecondMarket.com now gives accredited investors the chance to invest in Bitcoin without buying and storing these yourself. For most people holding Bitcoin is still something scary, because they don’t fully understand how it works and they are afraid of hackers. Especially if you put larger amounts into Bitcoin you want to make sure that your money is safe.

Therefore Second Market set up the Bitcoin Investmen Trust where you can buy certificates based on the current Bitcoin rate, and wherre you can sell them again at any time (at least after March 1 next year, until then there is no liquidity). I think this is a super smart idea that I should have thought of myself. I would advise any accredited investor who wants to put more than $25,000 in Bitcoin to look at Second Market, at least until the Bitcoin market will be more developed and wallets are easier to set up and use.

Last weekend David Lee of SV Angel (a well-known investment fund in Silicon Valley) wrote an interesting piece on Bitcoin: 10 Things I Think I Think on Bitcoin. Like me he seems to be very bullish on Bitcoin and he even says that if he would be in his 20s right now looking for a start-up idea and willing to do things others would not be doing (like most entrepreneurs!), he’d spend all his time trying to understand this topic!

David also understands that Bitcoin is much more than just a currency, because that’s just one application of the protocol. This is a fascinating thing and something I only started to see over the past couple of weeks. I won’t try to explain it here in detail, but if you are interested in what you could do with Bitcoin just read this Coindesk article about “colored coins”. Once people start to see this a whole new world of opportunities will open up.

Interesting is David’s observation that Bitcoin has many of the elements of modern “black swan” startups like Google and Facebook (I copy/paste his complete point 5 with some comments):

• highly polarizing – even and especially among early adopters and ‘experts’; –> I am surprised how many people want to argue with me about Bitcoin, the fact that I am so bullish leads to more heated conversations than with any other investment that I talk about.
• dismissive or downright hostile attitude by incumbents, usually non-technologists; –> I talked to several banks, but none is able to offer any Bitcoin related services. They don’t even look at this, likely because they dismiss it as not relevant for them.
• incompatible with and/or pushing against current legal regimes or regulatory systems; –> This is an interesting one, it remains to be seen how governments will react to Bitcoin once it becomes bigger. I believe it’s unstoppable, now they may still have a small chance to stop it from growing much bigger, but that window is closing fast.
• de-centralized thus involving crowdsourced-based content or activity; –> The whole Bitcoin protocol is based on a decentralized ledger and on the crowd for using and developing applications.
• false conventional wisdom that the service is only used for illicit or unsavory activity (e.g., everyone thought apps like YouTube, Snapchat, Facebook were used just for porn, hooking up, etc.) –> see Silk Road above
• unclear business model or applications. –> People only see it as a currency and not as a protocol which could even be used to take companies public without any authority regulating it, or for simple things as giving people a warranty coupon for a TV with a partial Bitcoin.

The more I learn about Bitcoin, the more I am convinced this may be the currency of the future. Today Baidu (the Google of China) announced that they also accept Bitcoin payments now for some of their services. I think that is a major breakthrough. China is already the biggest country for Bitcoin and this will only make it more popular. Theoretically Bitcoin could become a second currency in China, just like Tencent QQ Coins almost managed until it was more or less banned for real world transactions in 2009. The big difference is that Tencent’s currency was managed centrally (and could therefore be regulated), but that Bitcoin has no central authority.

The adoption will likely be very slow, but once the right tools are in place Bitcoin and its applications may be unstoppable. I therefore keep investing in Bitcoin itself, and with CrossPacific Capital we are also close to doing our first Bitcoin-related investment.

This morning it was raining hard when I woke up. I don’t mind a bit of rain (living in Vancouver means you’ll have to live with rain for most of autumn and winter), but when it’s Sunday morning and it rains so hard that you can hear the rain drops  hitting the windows I prefer to just stay in bed. However, I had promised Scott to take him to the Mosquite Creek Boat Show to look at some yachts, so I got up, showered and prepared breakfast.

When we wanted to leave I realized my wallet was not in its usual place. I assumed I had misplaced it, so I looked in a few other places but could not find it. Strange. I’ve never lost my wallet, at least not for more than 5 minutes (knock wood). So I tried to figure out when I had last used it.

That was yesterday when we took the gondola down from Whistler mountain into the village, after some mountain sightseeing and a late lunch in the Roundhouse Lodge (pictures see here). I remembered my father-in-law asked me how much lunch had been, and because I had not idea I checked the receipt. After that I don’t remember I used my wallet anymore.

After searching for my wallet for almost an hour I gave up. Either I had accidentaly dropped it in the gondola (I had Elaine on my lap, so I was not paying full attention) or someone had pickpocketed me in Whistler (very unlikely because I had the kids and my family around me and Whistler is not known for pickpocketing). Anyway, I decided to call the lost and found at the Whistler ski resort, where I got an answer machine (“We’ll listen to the messages at least once per day”). I left my name and number, but did not expect a call back.

I then worked a bit, I was not in the mood for the boat show anymore and was still annoyed with my stupidity. How could I be so dumb to lose a wallet, I could not get it out of my head. I made a list of all the things in my wallet that I had to cancel or renew (at least 3 credit cards and 2 debit cards, my drivers license, key cards for my parking garage and office etc.). I decided to wait a few hours, because there is always a chance someone finds it.

I locked myself in my study and among others set up a new Bitcoin wallet and wanted to transfer some coins into it (I spread the risk in case one of my wallet gets hacked). After doing that I went back to my main wallet and guess what… I was locked out of it. I had no idea why, but because there is quite some money in it I was a bit worried. I assumed maybe a cookie from the new wallet had caused an error, so I restarted my laptop. But still the same problem. It took me about 10 minutes (and a lot of sweating) to realize that I was using the password of the new Bitcoin wallet for my old one… I was just not thinking clearly because of my lost real wallet. I also realized again how vulnerable Bitcoin still is, I protect my wallets quite well but if you lose your passwords you have a serious problem.

Then Grace called me and told me lunch was ready. I went up to the living room but wasn’t in the mood for eating. Grace was talking to Scott who told her he had seen my wallet in the playroom. Grace asked him where, but he said he did not know. Then she asked if he had seen it last night, but he wasn’t sure. I didn’t pay too much attention to it, kids have a lot of fantasy and I had not been in their playroom last night. But then Elaine said that she had seen Scott with my wallet. What??? Grace questioned Scott and it turned out he had taken my wallet last night and hid it as a joke, but that he had forgotten that he had done so until just now. And worse, he did not know anymore where he had put it.

So I jumped up and went into the playroom. I scanned the room and indeed a minute later I found my wallet on a shelf behind some toys! I was very relieved. I wasn’t angry at Scott and was actually happy that he told me the truth (if I had found the wallet without him telling me I would have been less nice to him). But I also made clear that he understood that hiding a wallet is not a game he should ever play again.

Everything was still in my wallet and I was glad I did not cancel any of my cards yet – there were even 5 credit cards in there, I didn’t realize I carried so many on me. It taught me a lesson though, I am now going to take a scan of all my documents in my wallet and put them in the cloud. And I am going to carry less cards in case this should ever happen again. And I may revisit a company that I looked at a few months ago that developed a sensor for your wallet so you can more easily find it back!

This morning wasn’t too good, but the afternoon is a lot better: not only did I get my real and virtual wallets back, but while I’m writing this the rain stopped and I see the sun through the clouds. Time go go outside!

Fog above the ocean in Vancouver

Last night there was heavy fog in Vancouver, and for the first time since we moved here over 6 months ago I heard fog horns from ships passing by. When I woke up this morning the world was greyish white because of the fog. Although it had lifted a bit since the night before, we could hardly see anything beyond a few hundred meters.

We had planned to do a short hike, but because of the fog I wasn’t sure if we should not just stay at home. It was only about 16 degrees outside, a bit different from the warm summer weather over the past couple of days. But then I checked a webcam at Grouse Mountain and saw that it was sunny and 26 degrees at 1100 meters! It’s a weather pattern called inversion, which basically means that the temperature at lower altitudes is lower than at higher altitudes (normally it’s colder the higher you go).

This picture was taken less than an hour after the one above, but 1100 meters higher. No fog but sunshine!

So we took one of the cars and drove up to Cypress Mountain. Twenty minutes later we were out of the clouds and in the sunshine at the base of the Olympic ski station. We hiked a short trail around a mountain lake with the kids, they loved running around in the sun instead of looking at the clouds over the sea at home. And then we drove down again through the clouds, where it was raining when we arrived at the bottom of the mountain.

I love Vancouver, even if the weather is foggy you just drive up one of the mountains (or up to Whistler, 1 hour away from our home) and you’re back in the sun again!

A few months ago I started to do some research on Bitcoins (see my blog post from June 14 about this), a virtual currency that can be mined with fast computers. At first I wasn’t sure and thought it was a bit shady, but the more I read about Bitcoins the more convinced I was that this could be the next big thing.

I looked at a couple of Bitcoin start-ups for XPCP and I started changing ‘real’ currency into Bitcoins. As an economist I realize that Bitcoins are based on trust (just like gold or any precious commodity), but that the big difference is that supply is known in advance (there will never be more than 21 million Bitcoins) but that demand can only go up. Ergo, the price of Bitcoins has to go up. It’s of course more speculation than real investing, but I am a risk taker and I believe this ‘gamble’ could pay off big time.

Bitcoins are still very volatile. When I made my first foray into Bitcoins the price was around USD 100 (see the chart in last blog post about the currency), then it went down a bit until the price started going up to about USD 140 a few days ago. At the moment I write this the price is USD 132. In my opinion still a great price to buy at, so I will keep on buying. I don’t know where the price will go, but as long as the trust does not go away (the biggest risk for any currency) more and more vendors will accept the currency and more people will start using it.

The biggest hurdle in obtaining Bitcoins is the process of going through an online exchange. Because I am not Canadian it was hard to do it in Canada, and in Holland I needed a local mobile number in order to verify my identity. Although there are no regulations yet for Bitcoins in most countries, local exchanges all want to become official, so they have all kinds of internal regulations to make sure they will be approved eventually.

But although it’s very hard now that will change soon, because the first Bitcoin ATMs wil be shipped next month, and the very first ATM will be located in Vancouver! I believe this might be a game changer. It will still be difficult to understand how to set up a Bitcoin wallet for most people, but once you have done that (or once someone has helped you to do that for you) you can buy and sell Bitcoin very easily at the ATM.

This will certainly drive the adoption of Bitcoins and make the currency easier accessible for people who don’t fully understand the mechanics behind it. In total there will be 5 machines installed in Canada this year, likely the other 4 will be placed in Toronto, Montreal, Calgary and Ottawa. Good to see that my new hometown of  Vancouver is the first to get one.

I am off to buy some some more Bitcoins!