Bitcoin Is Challenging the Entire Concept of Venture Capital

In the salad days of bitcoin, venture capital firms bought into the craze in a roundabout way. Instead of simply purchasing bitcoins, they invested in companies like Coinbase, which makes a wallet for digital currencies, or 21.co, which aimed to improve the process of mining coins. Some of these bets were better than others. 21 has changed names and business plans, but Coinbase’s app hit the No. 1 spot on Apple’s App Store this month as the hyperventilation over bitcoin reached an extreme.

Meanwhile, the value of a bitcoin went from about $110 when Coinbase received its first major round of venture funding to $19,000 as of Sunday. “All the money that’s been put into Coinbase, etcetera, would have returned much better if it was put directly into bitcoin,” said Travis Scher, an investment associate at the Digital Currency Group, a bitcoin-centric investment firm.