Some retailers have reported seeing spikes in sales once they began accepting Bitcoin, but according to some exchanges, it appears most people are treating the virtual currency as an investment vehicle. For the digital currency exchange Kraken, trading volume indicates more people are investing--rather than spending--their Bitcoins, says Jesse Powell, CEO and founder of Payward. The company announced Tuesday it has raised $5 million in a series A round for Kraken, which in addition to Bitcoin also trades alternative currencies Ripple, Litecoin, Namecoin, Dogecoin, and Ven. In China, it's a similar story. "Bitcoin as a payment mechanism has not taken off yet, so all the trading volume of Bitcoin--the vast majority is in investment and speculation," says Bobby Lee, CEO of the Bitcoin exchange BTC China.
Creator of alternative currency Dogecoin, Jackson Palmer believes the success of virtual currencies is based on its use. "It's all about active use," he says. "The digital currency that's going to win is the one that's going to be used."
Though China classifies Bitcoin as a virtual commodity and not as a currency, Lee says he sees a future where exchanges or third parties will offer margins trading, leverage trading, credit lines, options, futures, and other financial products built on Bitcoin.
Steven Waterhouse of Pantera Capital Management said the virtual currency will enter the financial mainstream once Bloomberg terminals begin integrating Bitcoin charts and data. "Once Bloomberg publishes prices on Bitcoin and other digital currencies, that will enable a whole new class of users to get involved," he said, urging conference goers to lobby their Bloomberg sales representatives. "They're very driven by their clients' demands."