Interested in venture capital funding and bitcoin startups? Well, it seems that the secret has been in the market price for bitcoins. As in, the higher the price that bitcoins are, the more funding that seems to pour out of VCs and into bitcoin exchanges, wallets and other companies built around bitcoin.

The common thread seems to be that, with the exception of Tradehill, major funding went into bitcoin-influenced startups once the price went higher than $100 per BTC.

Now, anyone who knows a bit about venture capital realizes that there was due diligence going on behind the scenes at these companies for a good period of time. But one cannot dismiss the fact that the largest amounts of capital raised happened once the price of bitcoins went up above $100 per BTC. This was a time of some of the highest prices for bitcoins ever recorded, if many don’t recall those heady days last spring.

One of the biggest was the initial round for OpenCoin, which is a decentralized payment system and virtual currency competitor to bitcoin. While the funding amount is not officially known, OpenCoin was able to get the backing from some of the most well-known funding sources such as Andreessen Horowitz and Lightspeed Venture Partners. They also had another, and possibly bigger round, one month later via Google Ventures and IDG Capital Partners. The names involved alone give this event credence and mean OpenCoin likely received millions of dollars in funding.

Since bitcoin surpassed $100 earlier this year, venture capitalists seemed to really start believing in the bitcoin space. Fred Wilson from one of the most renowned VC firms, Union Square Ventures, wrote the following on their official blog:

We believe that Bitcoin represents something fundamental and powerful, an open and distributed Internet peer to peer protocol for transferring purchasing power. It reminds us of SMTP, HTTP, RSS, and BitTorrent in its architecture and openness.

The published date of that blog post is May 8, 2013. The price of a bitcoin at that time was over $110 dollars. Union Square had just announced its $5 million investment in CoinBase with additional funding coming from Ribbit Capital, SV Angel and Red Swan to total to a $6.11 million round. That’s the highest officially known funding for a bitcoin-based startup to date.

Chris Dixon, of Andreessen Horowitz, has written that bitcoin and other math-based currencies are a part of the “third era” of money. That was posted back in May. The value of a bitcoin has swung wildly in the time since, and a price like $110 actually sounds like a really great number these days.

It’s almost as if VCs don’t have complete faith in bitcoin as a pure investment, but are completely fine with putting money into businesses that are helping the network grow overall. That makes sense, since venture capital is really about investing in companies, and not financial instruments like bitcoin.

There are even a few venture capital funds out now that are totally focused on the bitcoin space. Boost VC is a fund started by Adam Draper, son of Tim Draper who has long invested in startups through Draper Fisher Jurvetson. Indeed, another fund, Draper & Associates, invested in CoinLab, which has pivoted its business from a quasi-mining company into a full-service broker of bitcoins. CoinLab is currently in litigation with Mt. Gox over a botched agreement about serving US-based customers, which CoinLab alleges that Gox reneged on.

Liberty City Ventures has a $15 million fund specifically for digital currencies called the Digital Currency Fund. That group is based in New York, a financial hub that is generating a number of bitcoin-based companies. Then there is BitAngels, which perhaps in tribute to bitcoin itself is a decentralized organization that involves angel investors from all over working together to fund the next great financial technology idea.

The one problem with VCs investing in bitcoin-related businesses is that it still doesn’t remedy the regulatory situation that exists in the market. And as we’ve seen, there’s really no hard determinant of prices. This is likely making venture capitalists wary of making million-dollar investments like we saw earlier this year when it was easy to contemplate the price of bitcoin to simply go up and up.

So far, there have been no favorable exits from the bitcoin market other than Satoshi Dice’s sale for $11.5 million. But that company did not receive any VC funding, which would have proved difficult anyway since it is a gambling site.

Overall the bitcoin space is still too young to see larger companies buying out bitcoin-based startups. And traditional investors aren’t getting involved in bitcoins – at least not quite yet. The Winklevoss-backed Bitcoin ETF may be an opportunity to expose more people to investing in BTC, but price volatility in the market might make it a tough sell to traditional investors.

Yet as we have clearly seen, all it really takes is for the price to go up to get the attention of smart venture capital money. Just take, for example, of some of these Bitcoin startups that have gotten influxes of investment cash. The question is: when bitcoin reaches record highs again someday, will we see a white-hot market for investment in the virtual currency space? If past performance is a predictor of future results, it seem that those circumstances would be highly likely. And there are a lot of funds out there paying close attention now.

What do you think about VC-backed bitcoin companies? Do you think that some of these startups will be acquired by bigger companies, and what kind of impact might that end up having on the bitcoin market?