mindtomatter
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March 31, 2013, 03:14:43 PM |
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You know Bitcoin actually raises the costs for some merchants, right? Their suppliers don't accept bitcoin so they need to convert into local currency, which usually has at least 1 or 2% exchange fees.
This talk is based on the idea that Bitcoin will be worth much more than it is now, so why do people want to spend it? While the fundamentals may suggest that, it's very seldom a straight rise up and to the right when it comes to new commodity markets, even ones as compelling as Bitcoin in this time of monetary chaos. What happens if bitcoin drops to $40/ea tomorrow, and stays there for a week? Will you be saying vendors should increase prices to accomodate for the increased risk? I don't think so.
It's a chicken/egg problem for sure, but if vendors have real costs that must be paid in USD or something similar they on-load either quite a bit of risk by holding volatile bitcoins or risk having money they sold for real goods or services suddenly diminish in value to them, which could be catastrophic.
Yes I know Bit-Pay offers a compromise solution, but that doesn't change the fact that a compromise between two imperfect options is still imperfect. Lots of risk up in here, especially for businesses trying to work with the currency.
This is of course a short term problem, once users start denominating USD in BTC instead of the other way around it's off to the races.
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