The Start of the Buttercoin Exchange:
Buttercoin opened for business in early November of 2014. The new exchange launched with great fanfare, boasting financial supports from the likes of Alexis Ohanian, Google Ventures, Centralway Ventures and Y Combinator. Buttercoin also had a great roster of clients at launch, including payment processor BitPay, and MegaBigPower, one of the largest industrial bitcoin mining companies in the United States. Buttercoin was aiming to serve the needs of the bitcoin business community by providing exchange facilities that could handle large bitcoin transactions (e.g. 100,000 to 200,000 BTC).
Buttercoin was not a bitcoin exchange in the traditional sense, but something akin to eBay, where buyers and sellers could trade between each other on specific terms. Buttercoin founder Cedric Dahl wanted to create a domestic marketplace that could compete with the likes of Bitstamp. Dahl believed that foreign exchanges could not provide the necessary bitcoin services that were so desperately needed by US-based bitcoin companies. The platform also had an excellent set of APIs allowing clients to build various applications on top of Buttercoin.
Dahl’s exchange had several institutional market makers such as hedge funds that would provide very competitive pricing on large bitcoin orders. Companies such as MegaBigPower became regulars on the Buttercoin exchange, where sufficient liquidity was available to execute large orders on a regular basis. The Buttercoin marketplace was open to any business/individual that complied with know-your-customer (KYC) standards. Dahl was very confident regarding the future of the Buttercoin platform, and believed that advertising directly to consumers was unnecessary, as Buttecoin was geared towards business-to-business (B2B) transactions.
The End of the Buttercoin Exchange:
Despite a $1.3 million infusion of VC capital and the backing of some of the most prominent firms in the bitcoin economy, Buttercoin was not able to attract an adequate clientele to maintain operations. In a final closing statement today, Buttercoin announced that it will be ceasing operations on April 10th:
“It’s been a wonderful ride and we’re delighted to have created a service so many people enjoy. With the dip in bitcoin interest among Silicon Valley investors, we weren’t able to generate enough venture capital interest to continue funding Buttercoin.”
According to the press release, all clients will need to withdraw all US dollar balances by Friday April 10th at 11pm. Clients who maintain BTC balances on the Buttercoin platform after the deadline will have their BTC converted to dollars and sent to the bank account that is on file.
Buttercoin has blamed a lack of VC interest as the primary reason for the shutdown. However, recent statistics have shown 2014 and 2015 to be a record years for VC Bitcoin investments.
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