Bitcoin moved to Missouri during 2015 when investors started to say things like:

“frothy eloquence neither convinces nor satisfies me. I am from Missouri. You have got to show me.”

Our Research Note on Tues defined the 4 stages of tech driven innovation:

#1: Cambrian Explosion

#2: Product Market Fit

#3: ScaleUp

#4: Consolidation

Usually markets go into Consolidation after they have gone through the Product Market Fit and ScaleUp stages. Bitcoin is unusual. It is a market that is consolidating before it is clear that it is a real market. There has been no Product Market Fit or ScaleUp phase and yet Bitcoin is already going through Consolidation.

The Bitcoin market today is driven almost entirely by VC cash. So the Consolidation stage is forcing many VC backed ventures to the dead-pool and forcing cutbacks in others.

Note: this is specific to Bitcoin. The state of Blockchain without Bitcoin is the subject of tomorrow’s Research Note.

The ones who survive the consolidation may end up as “last man standing” when Bitcoin as a whole achieves Product Market Fit. Of course Bitcoin may never achieve Product Market Fit, in which case being last man standing won’t be very helpful.

Here are the Bitcoin last man standing candidates:

• 21 Inc. They raised a massive $116m early stage round and have now launched their product – a $400 Bitcoin mining computer. The tech is clearly strong but that is a big bet that there will be a consumer market of Bitcoin miners. The people into mining today are either big scale operations or hobbyists who build their own rigs for gaming and then make cash on the side with some mining. Very smart people, deep tech, deep pockets – 21 Inc is one to watch – despite the fact that it has not yet got to Product Market Fit.

• Coinbasedid a big $75m round early enough in 2015 when you could still do these big Bitcoin rounds and have been patiently going state to state in America to get regulated. Coinbase could be the AOL of the Internet – derided by a lot of Bitcoin true believers but hugely valuable and something that brings Bitcoin to the mainstream.

• Circle is another mainstream consumer play, led by Jeremy Allaire who had IPO success in 1999 by creating tools to build websites in the early days of the Internet. Circle also completed their Series C in 2015.

• Bitfury is the biggest supplier of technology to Bitcoin miners as well as being Bitcoin miners themselves. They closed a $20m Series C in July.

• Xapo. One use case for Bitcoin that is getting traction is “digital gold” ie an inflation proof asset; that is the market that Xapo is focussed on. We reviewed them here.

• Blockchain. They have a different wallet approach to Xapo as we reviewed here. As they bootstrapped in the early days they maybe less dependent on VC cash to survive.

If Bitcoin does go mainstream these “last man standing” companies will do very well. If Bitcoin does not go mainstream, being last man standing clearly won’t have any value.

VCs may be seeing traction that gives them confidence to invest large sums, but that traction is only visible to insiders in these deals. At Daily Fintech, we do our Research Notes on data that is in the public domain and that data is not showing good traction in the one metric that matters – merchant transaction volume.

In another sign of Consolidation, one of the leading Bitcoin centric media firms, Coindesk, has been acquired. Their quarterly state of the Bitcoin report is a major resource. We hope their new owners continue to safeguard editorial independence.

Daily Fintech Advisers provide strategic consulting to organizations with business and investment interests in Fintech. Bernard Lunn is a Fintech thought-leader.