Classified as peer-to-peer technology with no central authority, Bitcoin is a digital currency that can be exchanged for goods and services. While the intangible nature of it may seem strange to some, bitcoin has made its way into the alternative investment industry.
Recently the Texas State Securities Board issued an Emergency Cease and Desist Order to the oil & gas exploration company, Balanced Energy, LLC in connection with its many compliance issues, including accepting bitcoins as investment. The order does not ban bitcoins as a form of investment but Balanced Energy has failed to disclose the risks involved.
Balanced Energy intended to convert some of the bitcoin into traditional currency. However, the value of bitcoin fluctuates intensely and is not regulated.
John Morgan, Texas Securities Commissioner, commented, “Although digital currencies such as Bitcoin are often touted as a sophisticated, online alternative to traditional currencies, investors should realize these currencies are not tangible, they are not issued by a government, and are not currently subject to traditional regulation or monetary policy.”
Despite the instability of bitcoin, the currency is growing in popularity.
Pantera Capital, which formerly focused on global macro hedge fund investments, has now dedicated itself exclusively to Bitcoin related investments and other digital currencies. Benchmark Capital, Fortress Investment Group, and Ribbit Capital are all acquiring interests in Pantera’s fund.
It remains to be seen how much more this digital currency will develop and how it will further affect alternative investments and the world at large.