(Photo: Flickr.com/Images_of_Money)

The FBI recently estimated that after three years, the Bitcoin economy is worth at least $35 million. Thanks to the uncertainty surrounding certain government currencies, it may soon be worth more. The Financial Post reports that fear over the value of the euro, strained by potential government insolvency in Greece and Spain, has led to a significant uptick in euro-for-Bitcoin trading.

Given the cyberattack last month in which thieves made off with $90,000 in Bitcoins--that's €71,738 euros, by the way--one would think another currency might be a better place to park your cash. However, some are scrambling to turn their euros into Bitcoins. Charlie Shrem, the Brooklyn-based founder of the Bitcoin transaction service BitInstant, claims potential customers are desperate to mail him euros. "European volume has been skyrocketing," he told the Post.

More euros changed hands on Bitcoin exchanges over the past week than in any week in Bitcoin’s history, according to the blog Bitcoin Money.

Data from the Bitcoin exchange Mt. Gox shows a significant increase in the volume of euros traded over the last month, when the price of Bitcoin in euros increased by roughly 15 percent. The euro is the second-most traded currency in the Bitcoin markets, accounting for 9 percent of transactions, followed by the British pound sterling (8 percent) and the Second Life Linden dollar (5 percent). The U.S. dollar still dominates, accounting for 72 percent of trading.

Traders on foreign currency exchanges had more faith in the euro, which has suffered from volatility but had been on a three-week high against the U.S. dollar.

Bitcoin is the East, and BitInstant is the sun.

A partnership between Bitcoin startup BitInstant (Brooklyn-based) and Georgia-based payments processor TrustCash means users can use BitInstant to pay for their BTC in cash by making a deposit at any of five major banks including Bank of America, Chase and Citibank. The process is a bit more involved than depositing to your own bank account; you must print or download a deposit slip from TrustCash, which alerts BitInstant of balances on 30-minute intervals. BitInstant then credits the BTC to the customer's account, minus the appropriate transaction fees. "It's just like depositing money into a bank account, except in this case, it's directly to your Bitcoin exchange/destination," says a press release.

And according to the release:

In addition to cash deposits, BitInstant users can now transfer unused or leftover bitcoin from the exchanges directly into their Paypal accounts and, utilizing Paypal methods, withdraw from their account in US dollars. There's no need to feel like your money is "trapped" as bitcoin. "No longer do you have to worry about getting your money in and out," explained co-founder Charlie Shrem. "It gives you peace of mind, as well as liquidity of funds, all done safely, securely and cheaply."

BitInstant was founded on the idea that the Bitcoin economy needs more liquidity. Bitcoin transactions in the past took days to weeks to process, long enough for the price of the volatile currency to change.

"I sat there one day feeling frustrated with the extremely slow speeds of transfers into MTGox and withdrawals out of it into other exchanges and came up with this idea," BitInstant's UK-based cofounder Gareth Nelson said in the release.

"Bitcoin are becoming a more and more useful and utilized method of payment for online shopping," Brooklyn-based cofounder Charles Shrem said in the release. "It's more secure than any other method of payment available - for merchants and customers alike. Some people would prefer to be able to directly transfer funds into their Bitcoin accounts, and, we listen to what our clients want. This is just one of many new services we'll be offering in the upcoming days and weeks. Cash deposits are just the start."

Odds are, you either had a Luddite or Libertarian relative recently say something about how they'd never put their credit card information on the internet. Or perhaps that person is you yourself? TrustCash is designed for customers who want to avoid tapping in their credit card numbers (this blogger's solution? Lose the credit card every ten weeks and get a new number). According to Mr. Shrem, the banks are aware of BitInstant and TrustCash's activity. Betabeat had trouble determining the mechanism TrustCash uses to process payments, so we've reached out to the startup to find out more. It appears that TrustCash holds an account at each major bank. Customers fill out a form on the site saying how much they plan to deposit. TrustCash sees when that exact amount is deposited—if the deposit amount is off by even a penny, TrustCash has to verify the transaction manually—which triggers them to alert BitInstant. BitInstant then credits its customers with BTC. "Something like that," Mr. Shrem acknowledged. "We integrated with [TrustCash] bank accounts, so when the customer deposits the software tells us in a fully automated way."

Brooklyn-based BitInstant

The original plan was to have three or four investors, but Mr. Ver offered in full and wanted to be on the team, Mr. Shrem said. "An offer I could not refuse!"

Mr. Shrem hired a programmer and a designer with the investment.

BitInstant has processed more than half a million dollars in transactions since launching in the beginning of September. Bitcoin transactions were taking days to weeks to process on the exchanges. BitInstant verifies a deposit and then fronts the credit to both parties so users can deposit money into their accounts immediately–hopefully in seconds, BitInstant says, but at most, within 30 minutes. It currently serves the two major Bitcoin exchanges Tradehill and Mt. Gox.

In addition to fundraising, Mr. Shrem, whose background is in ecommerce, and Gareth Nelson, the project's U.K.-based tech lead, have been pushing updates including, but not limited to, an API. That new innovation alone should inspire some interesting projects in the fast-iterating Bitcoin world.

BitInstant also now allows USD deposits into Mt. Gox, realtime updates on your order status, new payment methods including Dwolla, Liberty Reserve and Paxum ("with a record time of 11 seconds from payment on the hub page to payment into Tradehill account," BitInstant notes). And soon—maybe even this week—BitInstant will offer cash deposits at five major banks, instant PayPal withdrawals and will start serving Virwox.com and CryptoXchange.com.

*Mr. Ver writes in to clarify. "I'm far far far away from being the 'largest used computer parts site on the West Coast.' But I likely am the largest dealer of used optical transceivers on the West Coast."

Wake me up when the markets move.

The Bitcoin markets have been sleepy over the past week or two, and Bitcoin traders are starting to whine. What happened to the drama of hacks, the excitement of skyrocketing prices? The biggest news out of the weekend's Bitcoin World Conference and Expo was that the organizers teased future conferences in Thailand and Amsterdam. "As fun as it was, seems there were no great world-shattering announcements that would affect the world of bitcoin in the near future," one Bitcoiner who was present told Betabeat. "Other than more conventions as announced by Bruce." On the Bitcoin Forum at bitcointalk.org, user tacotime wrote: "Well, someone buy or sell a bajillion BTC and do something, it's boring as hell right now out there."

But the Bitcoin markets may soon pick up again as a Bitcoin start-up launching later today, in partnership with one of the better-known exchanges, is likely to encourage a new crop of casual traders and the Bitcoin-curious. 

It can take days, even weeks to get real money with which to buy e-currency into an account on one of the Bitcoin exchanges. In general, trading on the Bitcoin exchanges is relatively slow due to the inconvenience of transferring money and the scarcity of the coin. The fastest way to get money from the largest exchange, Mt. Gox, into TradeHill, for example, another well-known exchange, is to transfer money via the payments processor Paxum, which takes around 48 hours and charges a transaction fee.

Charlie Shrem, a Brooklyn-based entrepreneur, and fellow Bitcoin trader Gareth Nelson, based in the U.K., set out to solve this problem with The BitInstant Project, a start-up they're announcing today in an exclusive partnership with the Bitcoin exchange TradeHill.

Basically, BitInstant verifies a deposit and then fronts the credit to both parties so users can deposit money into their accounts immediately--hopefully in seconds, BitInstant says, but at most, within 30 minutes. "Our system works in many ways like a 0 percent interest short-term loan," Mr. Shrem, whose background is in e-commerce, said in an email. "Except you pay us and receive the money all in one shot, meaning it's not actually anything like a loan at all and that analogy is sorta invalid. You pay us an amount equal to whatever you wish to be deposited into your exchange account plus a small commission and at the same time we make a direct transfer at the exchange side from our account to yours."

BitInstant supports Liberty Reserve, Mt.Gox Coupon Codes and Dwolla, with more payment methods planned.

In the past, there could be a significant spread between the price at different exchanges--that will likely be eliminated thanks to BitInstant and future services in the same vein, which will have some depressing effect on trades by eliminating some of the market inefficiencies traders have been taking advantage of, but also encourage other more cautious traders who didn't want to bet on what prices would do in the days it took to complete a transaction.

Sorry Bitcoin thrillseekers--it does seem like Bitcoin engineer Gavin Andresen's wish may be coming true and the rollercoaster ride may be ending. That is, until the next SNAFU--hack, heist, technical difficulty, regulatory interference, etc.