DigitalBTC boss defends bitcoin amid half-year losses

Australian bitcoin company digitalBTC, which trades on the Australian Securities Exchange (ASX) as Digital CC Limited, has reported an underlying net loss after tax of $2.3 million for the half year ending December 2014, according to its first-half financial results published on Monday.

The company also reported earnings before interest, tax, depreciation, and amortisation (EBITDA) of $216,934, and revenue from ordinary activities of 14.5 million.

The company told investors that the six-month loss was due primarily to "non-cash accounting adjustments to the fair value of bitcoin inventory", along with performance rights and depreciation.

Although the Perth-based company has been busy developing a number of online and mobile digital payments products, it also counts bitcoin mining as one of its revenue streams, claiming 2,372 bitcoins held as at the end of December 2014.

However, the value of the digital currency over the past year has swung wildly, crashing from $224 to $175 in a matter of hours just last month. Bitcoin has had substantial tumbles in the past, falling from $589 to $468 in mid August last year, and again from $385 to $294 in early October 2014.

In fact, last month's bitcoin dump left digitalBTC answering awkward questions from the ASX after its share price went into freefall on January 14, while share trading volume skyrocketed, following the 22 percent drop in the virtual currency's value.

"The current bitcoin price impacts the profitability of the company's ongoing inventory, which is what the company believes is the reason for the recent price movement," Digital CC secretary Rachel Jellef said at the time in the company's response to the ASX query.

Given digitalBTC's current susceptibility to bitcoin value fluctuations, executive chairman Zhenya Tsvetnenko said that the company is in the process of fast-tracking the development and release of its digital commerce solutions.

These include online transactions platform digitalX Pocket, private liquidity platform digitalX Direct, and bitcoin mining infrastructure provider Mintsy.

"The statutory loss recorded for the half has been impacted by necessary accounting adjustments flowing from digital currency price declines," Tsvetnenko told shareholders in a statement (PDF). "None of these movements impact the core innovation of digital currencies and their potential to rapidly revolutionise the international payments sector.

"Our focus remains on the development of our FinTech software to create applications which will allow consumers fast and secure transactions regardless of size and geography. The turnover of our Liquidity Desk and digitalX Direct operations will underpin a number of our initiatives in this area.

"The further recognition and uptake of digital currency in the market amongst big financial institutions has been very encouraging and evidences the interest in the underlying technology behind bitcoin," said Tsvetnenko. "We are pleased to be a first mover in the space whilst we become a vertically-integrated payment technology company."

As at the half year ending December, digitalBTC held net assets of $6.87 million, $747,037 of which was bitcoin inventory, with the remaining $4.9 million held in cash.

At the time of writing, Digital CC Limited's shares stood at AU$0.12, down from $0.38 in June last year, around the time when bitcoin value surpassed $665.