During that past 18 months, we’ve noted on numerous occasions the challenge the virtual currency Bitcoin has in winning over the confidence of Main Street small business owners–a key audience if the ‘net enabled currency is to survive for the long term. Add to those previously noted woes, Buttercoin, a bitcoin exchange startup backed by some big names in Silicon Valley, is closing its doors at the end of this month after failing to raise new investment.

“Bitcoin has demonstrated the potential for success of a virtual currency, but too many and too highly visible negatives are making it difficult to believe the Bitcoin ‘brand’ will last for the long haul.”

Bitcoin setbacks that don’t reassure small businesses of its longterm viability

  • Its use by criminals and terrorists.
  • Its highly volatile (and downward) changes in valuation of Bitcoin vs. the dollar (see chart below).
  • Some highly visible failures, one involving $450 million being lost or stolen
  • And now, the inability to raise more venture funding by a high-visible Bitcoin exchange

    • Bitcoin price index

    In a message on its website, Buttercoin wrote this:

    “Buttercoin will be turning off our service on April 10th at 11PM Pacific,” the company said in a note on its website. “Be sure to move your bitcoins to another service and remove your dollar balances by Friday April 10th at 11PM.” Any unclaimed funds will be returned to the accounts that they came from, the company added.

    Buttercoin claims it is solvent and will provide users with their balance in full. The startup said it is winding down because it wasn’t able to raise new funding — that’s something it attributes to a “dip in bitcoin interest among Silicon Valley investors.”

    According to TechCrunch, Buttercoin raised a total of $1.6 million from investors, including Google Ventures’ Kevin Rose and Chris Hutchins, Reddit founder Alexis Ohanian, Floodgate, Initialized Capital, Rothenberg Ventures and Switzerland’s Centralway, via its first early-stage investment fund.

    Buttercoin launched in 2013 with the aim of tackling the global remittance space, aka money that migrant workers send to their relatives back home. It’s a huge opportunity — The World Bank estimates that some $515 billion will be sent in developing countries this year — and Buttercoin’s take was ambitious, it wanted to open local exchanges in a range of countries to facilitate cheaper cross-border currency transfer.

    (Illustration: ThinkStock.com)

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