How does BitPay handle price volatility?

[dave111223]

I noticed that when purchasing from a merchant using BitPay they give you about 15 minutes to make the payment.

What happens if you happen to be paying right at the peak before a crash?

For example you want to buy a widget for $90, which at the checkout equals 1BTC.  However you don't pay for 10 minutes, at which point your 1BTC is only actually equal to $75 due to a flash crash.

Who eats the loss?  Does the merchant still get $90, or do they only get $75 or do they refund your 1BTC and say it's no good for the order (or god forbid do they just hold your 1BTC and hope it goes back to $90)?

[Littleshop]

I noticed that when purchasing from a merchant using BitPay they give you about 15 minutes to make the payment.

What happens if you happen to be paying right at the peak before a crash?

For example you want to buy a widget for $90, which at the checkout equals 1BTC.  However you don't pay for 10 minutes, at which point your 1BTC is only actually equal to $75 due to a flash crash.

Who eats the loss?  Does the merchant still get $90, or do they only get $75 or do they refund your 1BTC and say it's no good for the order (or god forbid do they just hold your 1BTC and hope it goes back to $90)?

I am NOT bitpay but.....

It is pretty obvious if you use their service to receive USD, you get $75 - 1% deposited to your bank account if that is the invoice amount. 

Since the price has been rising far more then it is falling on average this would probably make them money long term.  This could be upset by bad luck, but on average if BTC keeps rising they probably are not feeling unlucky right now. 

[dave111223]

So merchants are actually taking a huge risk by using Bitpay?

Let's say you get hit with massive sales during a crash...I'm assuming bitpay will not allow you to just refund the original BTC amount, (seeing as the dollar exchange has already been done), so you are screwed with whatever you get?

In general how do refunds with Bitpay work anyway?  Seeing as you can't refund the person the same amount of BTC that they paid because the price will have changed?

Whereas if you just accept bitcoin payments directly to your own wallet you:
- Don't pay 1%
- Have the option to refund the exact same amount of bitcoins that was paid (so just nullify the order if price loss is too great)
- Still have the same price volatility risk

You then exchange the bitcoins for cash on your own schedule (when there is not a crash is progress)

Given this why do people use bitpay?

[moni3z]

Bitpay exists for businesses that want to accept bitcoins but don't want to sit trading them 24/7 in order to not get screwed on the flash crash. You're gonna pay that 1% somewhere, either when you trade on Gox and withdraw or with another p2p trader who's not charging full gox rate.

They are probably trading wholesale with coinlab and other bitcoin corps and not just at the mercy of gox flash crashes, though I would imagine a major crash would blow everything to hell unless there's some fine print on the Bitpay site that says 'we aren't responsible for the market getting Goxxed and coins dropping to $16/ea in 1hr'

So they obviously are covering the volatility with the profits they make, which is up to 3% for some merchants. Since they are 60% likely to always make money it's a win for them to just cover any small drops in value. A major drop, whoknows

[SBC]

I believe (and I'm not BitPay either) that they ensure that the merchant and the seller get whatever is quoted in the 15 minute window - hence the reason its only valid for 15 minutes. So - if you buy a $75 printer @ 1 BTC - the merchant gets $75 and you pay 1 BTC, even if BTC rises or falls. I believe that merchants can also choose to denominate their account balance or a portion thereof, in Bitcoin minus the ~3% transaction fee. Of course, any merchant holding Bitcoin is effectively agreeing to take on the market risk (rises - great, falls - not so great). How BitPay handles refunds I am unsure...

I can't imagine the current trend is good for BitPay, WalletBit or any of the other payment processors. As a commodity; Bitcoin is great because the price keeps going up (for now...caveat emptor), but for merchants it must be off putting to see a complete lack of stability - unless you live in Zimbabwe of course. It would seem likely that the adoption rate by merchants might drop off somewhat until some sort of leveling out occurs.

[BitPay Business Solutions]

when the invoice is created, the rate is locked in for 15 minutes.  So buyers and merchants do not assume any volatility as long as the transaction can be paid within the time window.  This allows commerce to take place in a volatile market, with no risk to the merchant of the volatility.  BitPay assumes the risk for up to 15 minutes.  Although most people pay within the first 1-2 minutes, so the risk window is shorter.

[forbun]

What are the 3 exchanges used by BitPay? https://bitpay.com/bitcoin-exchange-rates

Does BitPay take into account each exchange's fees?

[🏰 TradeFortress 🏰]

I noticed that when purchasing from a merchant using BitPay they give you about 15 minutes to make the payment.

What happens if you happen to be paying right at the peak before a crash?

For example you want to buy a widget for $90, which at the checkout equals 1BTC.  However you don't pay for 10 minutes, at which point your 1BTC is only actually equal to $75 due to a flash crash.

Who eats the loss?  Does the merchant still get $90, or do they only get $75 or do they refund your 1BTC and say it's no good for the order (or god forbid do they just hold your 1BTC and hope it goes back to $90)?

I am NOT bitpay but.....

It is pretty obvious if you use their service to receive USD, you get $75 - 1% deposited to your bank account if that is the invoice amount. 

Since the price has been rising far more then it is falling on average this would probably make them money long term.  This could be upset by bad luck, but on average if BTC keeps rising they probably are not feeling unlucky right now. 

Nope.

BitPay guarantees the rate.

[arsenische]

so it is possible to abuse BitPay... and other buyers will pay for people that do it (since such losses will be included in BitPay fees)... interesting.

[jettico]

As for refunds,

So merchants are actually taking a huge risk by using Bitpay?

Let's say you get hit with massive sales during a crash...I'm assuming bitpay will not allow you to just refund the original BTC amount, (seeing as the dollar exchange has already been done), so you are screwed with whatever you get?

In general how do refunds with Bitpay work anyway?  Seeing as you can't refund the person the same amount of BTC that they paid because the price will have changed?

the way easydns.org handles them seems pretty reasonable for me:

Also note that given the volatility in Bitcoin pricing, if you require a refund it will be in normal human currency, like USD or CAD

http://blog.easydns.org/2013/04/16/we-now-accept-bitcoin-as-a-payment-method/

[TheButterZone]

"Normal human currency"=USD or CAD
"Abnormal alien shabwablen"=bitcoin

[jettico]

 

I shall avoid this wording on my own site.

[Hunterbunter]

so it is possible to abuse BitPay... and other buyers will pay for people that do it (since such losses will be included in BitPay fees)... interesting.

only really if the price is dropping. If the price is going up, bitpay win.