Bitcoin Forum

Right, so please tell me if im missing something blatantly obvious.  But with the volatility of BTC being such that it changes on the hour, for vendors to start to accept it as a legitimate currency wouldnt their prices have to be dependent on current the exchange rate?

For example.

I want to buy a pair of trainers that typically cost $80 USD, back in July I could have purchased this with 1BTC.  So lets say today that same vendor has them marked at 1BTC or $80 USD, if I paid by BTC my trainers now cost over $800!

So with people wanting to accept BTC how do you envisage pricing so that it is realistic based on fiat (via a conversation based on current price)?

Unless im missing something, without a rate determined straight away I cant see how mass adoption can be viable?

Or what am I missing?

As long as the price goes up, the merchants can make additional profit from accepting bitcoin, they can hoard a few days and sell higher later.
But drops like 900$ to 450$ within 2 days scare them away. And once the bubble pops, most won't touch bitcoins, it's going to be too risky.

1. Use Bitpay. People pay you in BTC, but you get you 80$ and do not really care how high the btc price is.
2. Take btc and it is increasing it's value, but in zick zack? It is your choice. Would you be sad if you had taken that 1btc for the pants you sold?
3. Bitcoin is no money today. Today people are aware that it can go to 10 000$+ or to 0$. It would be not normal if the price is stable or growing stable with 1% every month.

Bitcoin startet with literally 0$ value and as money it would be cost 100 000$ and more. Why do people expect that the price of 1BTC will stay the same all the time. How to come from 0$ to 100 000$ with a stable price?

So the problem is for the customer not for the merchant. That's why so many people are hoarding instead of buying right now.
If i was a merchant i whould love to do every single sale in bitcoins.

They'll accept it when it's no longer volatile. Now is the wealth preservation phase of Bitcoin.

Or in the meantime they can use Bitpay if they want to be an early innovator.

Some people will make purchases for the same reason that they sell: their portfolio is overweight in BTC (https://bitcointalk.org/index.php?topic=345065.0). This will usually only be after they have accumulated enough BTC for their goals.

You realise that merchants dont take risk right? Using bitcoin as payment processing means exactly that..... "processing" They dont receive your bitcoins for god's sake. They receive dollars.

The one that take that risk is you..... just like you're holding bitcoins. Price can go up and down.

BitPay is the simple answer, until liquidity and adoption is so high that volatility is reduced to irrelevant levels merchants will be using BitPay or similar services to instantly convert bitcoins to dollars/euros/whatever at the time of purchase. Until that time bitcoin will continue to grow because more and more people are finding out its great advantages as a store of value and its portability. Volatility is also a concern to us ofcourse, but we are much more risk tolerant and seeing the long term trend the upside risk far outweighs the disadvantages of short term volatility. :)

The problem with this analysis is that ignores that fiat currencies, in particular USD, are inflationary. What $1000.00 was worth in 1920 is not what it is today. The advantage of Bitcoin is that it is capped @ 21 million bitcoins. The Fed, on the other hand, keeps flooding the economy with more dollars, which dilutes the purchasing power of your dollar everyday.

Think of it this way.

If there are only $1000.00 USD in circulation, and you had $100.00 all to yourself, you would be a very rich man. If you only had $100.00, but there are 1 trillion dollars in circulation, your $100.00 is worth a lot less. It has been diluted.

Bitcoin is the opposite.

BitPay is the way to go now, I still spending Bitcoins because it is cheaper than converting to cash. So merchants seeking new customers should add Bitcoin option using BitPay

Bitpay provides an instant fiat real time conversion service for those who don't want the vol

The problem isn't the fiat to bitcoin conversion. That's easy anyway although bitpay offers a great service.
The problem is the the volatile price and the way that bitcoin rises during the last month that pushes people to hoard instead of spend.

Why is that a problem? You can always buy back the bitcoins you spend immediately if you prefer to keep your bitcoins and think its value is going up.

Isn't that like paying in fiat in the first place   ::)

No , it actually add the pain in the ass of sending money to an exchange waiting for the transfer , probably loose a few if you buy at the wrong time , add the fees and you have the whole picture.

If you like holding on to depreciating fiat, yes it's the same. I don't however and keep my fiat to a minimum. So if I can, I like to pay for things I need in bitcoin.

Gresham's Law. Learn and love it. :)

It's a misunderstanding that bitcoin has been created to facilitate pervasive low cost transactions. Transactions are important, and they occur, but they are not designed to support low level trade in the same way that you can't easily buy a tube of toothpaste with gold. Improvements to BTC may make that a reality, but today it is certainly not the case. Additionally, we are in the stop-gap phase where transactions are still intended to execute at a fiat level. If BTC is successful, then transactions will be priced in BTC independent of the fiat levels. The value of the dollar goes up and down all the time, but merchants generally aren't market pricing items to the second based on exchange rates, and most don't really care. The additional gain-able profit is pure speculation anyway.

What is more likely is that a layer of banking will be built on top of BTC where involving the blockchain in every transaction is unnecessary. You probably use real fiat once a week if that to buy some small items. Instead you trust some 3rd party update their ledger for everyone and give you the real fiat if you asked for it. Broad adoption of losable wallets on cellphones spells consumer-protection disaster.

^^^ This.

There are stages to this process folks.   Bitcoin is only 3 months old, as far as worldwide awareness.   How long has the US Dollar been around?

How did Gold look as a currency 3 months after it was first used?

Hoarding (saving) is really just propagation of the currency, which is necessary while Merchants establish the infrastructure.

When both are done?   Commerce begins.

-Burger-

The OP has a huge point.

Its not clear to me how Bitcoin will stop being a volatile asset, at least as volatile as gold, and start being a currency.

The OP has no point. If the product that you are selling is valued in fiat, then use bitpay, set price in Fiat, and BTC price would be adjusting automatically.

If, on the other hand, the product you are selling is valued in bitcoins, then you set a fixed price in bitcoins, and don't care how much fiat that means, because you pay up the chain with bitcoins, too. However, that latter scenario would only work in about 10-20 years from now for most goods. For now, you can use it for virtual goods, possibly, or use fiat-based pricing. Only when whole economies work on bitcoin would this be feasible.

Of course, the exchange rate would, by that time, be on a slight deflationary growth, and the price would have several more digits. Local currencies would be used inside the national borders and offline, but other than that most wealth would naturally be in bitcoin (as it would be superior in stability). I know, sounds like a pipedream, but $100 per bitcoin sounded like a pipedream a year ago too.

It's already a currency, I can order food online and pay in bitcoin in my country no problem. Merchants love BitPay because of the low fees involved. Bitcoin can be whatever we want it to be, perhaps it's more useful as a store of value like gold and there's nothing wrong with that either. The biggest hurdle for bitcoin to become a widely used currency is the number of transaction it can handle per second, not its volatility. But even that is not an insurmountable problem. Personally I can live just fine with bitcoin as a store of wealth, and perhaps order a pizza once in a while with it. :)

Those who selling USB Block erruptors have to adjust USD price instead because manufacturer bought the chips with BTC. The seller has to sell for about 0.05 BTC no matter what USD/BTC exchange rate is.

When more business is done in BTC directly in future, the BTC prices can be stable no matter what USD/BTC exchange rate is