BitPay is not Bitcoin....persistent foreign exchange risk costlier than CC.

[Manticore]

You guys are missing the point here.

It's a tall order to make someone become an investor by exposing them to large foreign exchange risk (currency fluctuation risk) simply because they want to save money on wire fees and credit card fees, which seems to be what many champion when discussing Bitcoin. There is no point in highlighting the fact that BTC can save any money on fees because it likely can't.

It is simply a tool for investors to make purchases with their investment. It doesn't offer the public a cheaper transactional fee structure. It forces them to become investors by making them take on enormous currency exchange risk (USD/BTC) in order to, under perfect circumstances, save maybe 1% in various transactional fees because:

A) 99.9% of online purchases are through BitPay and their 1% charge
B) Spread is 0.5% - 1% (or 5%+ during high volatility) and must be accounted into sale price through BitPay
C) Foreign exchange risk (USD/BTC fluctuations) are greater than any CC or wire fee
D) Paypal offers free intra-border money transfer, so this does not help people who aren't already invested in BTC
E) Paypal offers low cost international money transfer, ditto.

So champion it for what it is, an investment that allows investors to make purchases with their investment. Only with a great deal of luck will it save anyone else anything on transaction fees.

Because only investors are incentivized to make purchases with BTC, and because there is an incentive for investors to hoard, I see this as something that limits BTC online transactions (and BitPay because 99.9% of merchants will only accept through them).

And If people begin making substantial online purchases with BTC, because these purchases will likely be made by investors who already hold substantial coins, the market will likely trend lower because there will be no off-setting transaction for the BTC to USD (or whichever currency) conversion that happens through BitPay.....again, because almost all merchants accept Bitcoin through BitPay.

[Manticore]

actually, I'd say my largest customer bases are

The UK
Netherlands
The US
Germany

in equal parts.
Then, the rest of the world.

The vast majority of these customers are likely Bitcoin investors that are using their investment to make purchases, not people using BTC because they save money on transaction fees (perhaps the international customers, but currency exchange risk is potentially much higher than savings even for them).

[Manticore]

One can also accept bitcoins through BitPay and take bitcoins, either fully or a portion of the sales. Our company is an integrator partner with them, and we know that not all merchants do the fiat conversion. But it's true that only true Bitcoin believers do that. It should change through time though, since it's quite beneficial for companies to simply hold as much bitcoins as humanly possible.

Sure, but the vast majority want immediate conversion. An entire industry exists for hedging this type of risk (futures/forex). Why would Bitcoin be any different? As long as foreign exchange risk is there, the overwhelming majority of customers will want the conversion.

[DiThi]

If the price weren't fluctuating at all, I would have all of my money as possible in bitcoins. In fact I tried during the long 5$ period last year. I don't use myself as an "investor", but as an user that has its own bank. There were several potential purchases last year that I didn't make because I had to go to the bank, do transfers, etc.

Potential clients includes investors, but also users that just want to save in bitcoins. It doesn't matter that merchants convert the money into USD, the other advantages still applies.

Also, PayPal is very expensive for very small purchases.

[Manticore]

If the price weren't fluctuating at all, I would have all of my money as possible in bitcoins. In fact I tried during the long 5$ period last year. I don't use myself as an "investor", but as an user that has its own bank. There were several potential purchases last year that I didn't make because I had to go to the bank, do transfers, etc.

Potential clients includes investors, but also users that just want to save in bitcoins. It doesn't matter that merchants convert the money into USD, the other advantages still applies.

Also, PayPal is very expensive for very small purchases.

Again, you are missing my point. Because this fluctuates so wildly, anyone who wants to use Bitcoin IS an investor.

Imagine if the USD (or pick a currency) fluctuated wildly in reference to CPI (consumer price index)? One would be required to essentially become a forex trader in order to maximize everyday purchases. This is why Argentines & Venezuelans trade for USD (on a massive black market), because it's stable comparatively. Bitcoin does not enjoy this type of stability.

It is an investment tool that can be used to make purchases from merchants who use BitPay to hedge, nothing more.

[Manticore]

They accept:

• Lower fees
• No chargebacks
• More potential clients
• Exposure to a huge community

Lower fees....debatable. We just moved from from $166+ to $157 in no time. That transaction just became 5%+ more expensive if I purchased @ $166, not including spread and BitPay transaction fees. Actually, while I'm writing this we are now at $153.....so much more expensive than any CC fee. This is the foreign exchange risk I'm talking about. $166 - $153 is almost 8% in a matter of minutes.....plus 1% for BitPay and 1% for the spread (now at 1.5% due to volatility).

So if I had bought a few minutes ago at $166 BTC for a transaction that just occurred, it would have cost 10%.......way higher than any credit card fee.

No chargebacks.....true.
More potential clients.....are you finding people that only use Bitcoin and not fiat???
Exposure to a huge community.....are you finding a community that exists entirely outside the fiat landscape???

[Brushan]

Didn't bitpay report that many merchants are willing to convert a smaller share of the payment to USD than before.

[Manticore]

Didn't bitpay report that many merchants are willing to convert a smaller share of the payment to USD than before.

Perhaps, but still minuscule.

[amencon]

I see it as potentially a intermediary step on the way to widespread adoption.

1) Due to increased user interest merchants sign up with BitPay and accept BTC converted to USD
2) With more merchant accepting BTC as a form of payment, more users become aware of it and start using BTC
3) Go to step 1, if sufficient merchants accept BTC and enough users adopt BTC see step 4
4) Some suppliers for merchants begin to accept BTC
5) With market cap up due to user adoption plus ability to order supplies for BTC, merchants begin to hold more of their sales in BTC from their processor
6) Eventually a full BTC economy is born

Of course I'm not saying the above will happen.  Only that if Bitcoin does become mainstream, that may be a possible path it could take.  Therefore I think there is a chance that merchants accepting BTC converted to USD could just be a valid stepping stone to the wide spread success of a future Bitcoin economy.

Definitely a valid concern Maticore, however I still see value in more merchants accepting BTC even if the vast majority convert it all to USD for now.  Not long ago many people would have thought there would be no incentive for merchants to bother accepting BTC at all in any form, certainly at least on any larger scale.  That was a valid concern at the time, but somehow we got from there to here.  If things work out long term for BTC I think it will be an iterative process.  At each step you will be able to make the complaint we aren't at the next step, and it will be a valid concern until it isn't.

[warpio]

It's true that bitcoin needs to be less volatile to be more useful as a currency. But how do we accomplish that? As long as there are people who would rather have fiat than bitcoin, it will always be volatile. The only solution is for BTC to have its own booming economy where you can buy and sell just about anything. When that happens, people will no longer want to trade their bitcoins for fiat.

[Manticore]

It's true that bitcoin needs to be less volatile to be more useful as a currency. But how do we accomplish that? As long as there are people who would rather have fiat than bitcoin, it will always be volatile. The only solution is for BTC to have its own booming economy where you can buy and sell just about anything. When that happens, people will no longer want to trade their bitcoins for fiat.

I don't know the solution......but I believe that if everyone had a more balanced approach to Bitcoin 'investing' they may be less prone to create an endless wave of bubbles that will render it useless as a currency. The more excited everyone gets over press releases of little substance, the more it gets pumped, the less useful it is as a currency, and the less likely it is to succeed. I'm not sure there is a price level ($1000, etc.) that will prevent it from being volatile.

I posted this on another thread: http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_8qRwhHaLc7b5Sp7

Most major economists believe that the most serious shortcoming of Bitcoin is its inherent volatility.

[DiThi]

Again, you are missing my point. Because this fluctuates so wildly, anyone who wants to use Bitcoin IS an investor.

Lower fees....debatable. We just moved from from $166+ to $157 in no time. That transaction just became 5%+ more expensive if I purchased @ $166, not including spread and BitPay transaction fees. Actually, while I'm writing this we are now at $153.....so much more expensive than any CC fee. This is the foreign exchange risk I'm talking about. $166 - $153 is almost 8% in a matter of minutes.....plus 1% for BitPay and 1% for the spread (now at 1.5% due to volatility).

Take the 24-hour weighted average. Or 3-day weighted average. Is what regular people should use. Also, this volatility won't remain forever. Merchants don't like volatility, even when converting to USD, so at least they believe it's temporal.

More potential clients.....are you finding people that only use Bitcoin and not fiat???
Exposure to a huge community.....are you finding a community that exists entirely outside the fiat landscape???

I do use fiat, but as I said earlier, there were several potential purchases that I didn't do at all because of lack of merchant support. Having a bitcoin option makes me more prone to spend money.

This is the chicken and egg problem. Your statements are like critizing creating e-commerce 10-15 years ago: the public was too small, but we needed those early merchants to keep the ball rolling, get more people used to do online transactions, hence geting more merchants doing e-commerce... etc.

[Manticore]

Take the 24-hour weighted average. Or 3-day weighted average. Is what regular people should use. Also, this volatility won't remain forever. Merchants don't like volatility, even when converting to USD, so at least they believe it's temporal.

Why would I do this if I purchased BTC at $166 a couple of hours ago and made a purchase at $146 a few minutes ago for 13.5% in total fees (12% more BTC or USD, however you want to look at it, 0.5% spread to be generous, and 1% to BitPay).

I do use fiat, but as I said earlier, there were several potential purchases that I didn't do at all because of lack of merchant support. Having a bitcoin option makes me more prone to spend money.

This is the chicken and egg problem. Your statements are like critizing creating e-commerce 10-15 years ago: the public was too small, but we needed those early merchants to keep the ball rolling, get more people used to do online transactions, hence geting more merchants doing e-commerce... etc.

No, it's nothing like e-commerce. We're talking about massive and constant currency fluctuations that Nobel Laureates are saying is the biggest threat to the currency (but perhaps you have a better grasp of economics than they do?). E-commerce had adoption issues but there was nothing inherent to e-commerce that imperiled its usefulness (nor was anyone calling into question its usefulness). Slow adoption and security were issues but it quickly caught on and never looked back.

It's not a chicken and egg problem. All things equal, if the current companies that have adopted BitPay had never issued press releases, we would not have bubbled to this extent and those businesses would still easily be able to transact business. Over-exuberance is not required to make Bitcoin useful. It does need to appreciate, but not at this rate and not due to press releases of little substance. The higher this goes, the more hoarding will become an issue.

The more volatile it is, the more limited its use will be because only investors will be willing to purchase it and subsequently use it for transactions. It would be nice if we had a much broader potential transactional market than Bitcoin speculators.

I'm not trolling, regardless what any of you think. I am actually offended at the people that want nothing more than to keep this pumped into the stratosphere because it will only slow adoption by consumers, which is more important than merchants because merchants are really just accepting USD through BitPay. It's the consumers that have to assume the massive foreign currency exchange risk, not merchants.

I am a libertarian who loves the concept, is tech savvy (not a programmer but very familiar with Linux, etc), and is primarily involved in the finance industry. I only say this because people may be getting the wrong idea as I am usually making negative postings. I am invested in Bitcoin in various ways and want to see it succeed. Irrational exuberance will not aid this success.

 

[Manticore]

I think one potential problem is that early (or earlier) adopters with a low cost basis are much less concerned with the foreign exchange risk when making transactions than newcomers (the people who will push this higher).

[DiThi]

Users can see what the actual exchange will be applied and choose to wait if diverted too much from the average.

You can't prevent press releases, sudden price swings... Do you know any other way of finding the correct price according to use?

[kjj]

It's true that bitcoin needs to be less volatile to be more useful as a currency. But how do we accomplish that? As long as there are people who would rather have fiat than bitcoin, it will always be volatile. The only solution is for BTC to have its own booming economy where you can buy and sell just about anything. When that happens, people will no longer want to trade their bitcoins for fiat.

I don't know the solution......but I believe that if everyone had a more balanced approach to Bitcoin 'investing' they may be less prone to create an endless wave of bubbles that will render it useless as a currency. The more excited everyone gets over press releases of little substance, the more it gets pumped, the less useful it is as a currency, and the less likely it is to succeed. I'm not sure there is a price level ($1000, etc.) that will prevent it from being volatile.

I posted this on another thread: http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_8qRwhHaLc7b5Sp7

Most major economists believe that the most serious shortcoming of Bitcoin is its inherent volatility.

Wow, what an incredibly stupid question.  The only thing dumber than that question is the collection of answers given.

All money's value derives solely from the belief that others will want to use it for trade.  That's kinda what money is.  In historic times, there was regression, where unlimited demand for something made that something useful as money because of a belief that it could be dumped into a waiting buyer in exchange for something else of value.

But we've gone way past that now.  Our money is nonsense.  There is no entity (or group) willing to accept it in unlimited quantities in exchange for something of value, there is just a great mob where each person uses it because everyone else uses it.  That is the essence of our modern money system.  It is, therefore it is.  And it works.  It isn't "backed" by anything, and yet, anyone can use it to obtain anything.

Bitcoin is exactly the same thing.  It is nonsense, shared by a crowd.  It works because it works, and for no other reason.

The dollar's value fluctuates over time, and yet people dont stop using it.  Hell, the value has declined by like 99% over the last century or so, and we still use it.

The value of everything fluctuates, all the time.  Bigger markets, like the dollar, tend to fluctuate more slowly, because they are big, not because they are magic.  Smaller markets, like bitcoin, tend to fluctuate more quickly, because they are small (and thus easier to move), not because they are flawed in some way.

[Manticore]

It's true that bitcoin needs to be less volatile to be more useful as a currency. But how do we accomplish that? As long as there are people who would rather have fiat than bitcoin, it will always be volatile. The only solution is for BTC to have its own booming economy where you can buy and sell just about anything. When that happens, people will no longer want to trade their bitcoins for fiat.

I don't know the solution......but I believe that if everyone had a more balanced approach to Bitcoin 'investing' they may be less prone to create an endless wave of bubbles that will render it useless as a currency. The more excited everyone gets over press releases of little substance, the more it gets pumped, the less useful it is as a currency, and the less likely it is to succeed. I'm not sure there is a price level ($1000, etc.) that will prevent it from being volatile.

I posted this on another thread: http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_8qRwhHaLc7b5Sp7

Most major economists believe that the most serious shortcoming of Bitcoin is its inherent volatility.

Wow, what an incredibly stupid question.  The only thing dumber than that question is the collection of answers given.

All money's value derives solely from the belief that others will want to use it for trade.  That's kinda what money is.  In historic times, there was regression, where unlimited demand for something made that something useful as money because of a belief that it could be dumped into a waiting buyer in exchange for something else of value.

But we've gone way past that now.  Our money is nonsense.  There is no entity (or group) willing to accept it in unlimited quantities in exchange for something of value, there is just a great mob where each person uses it because everyone else uses it.  That is the essence of our modern money system.  It is, therefore it is.  And it works.  It isn't "backed" by anything, and yet, anyone can use it to obtain anything.

Bitcoin is exactly the same thing.  It is nonsense, shared by a crowd.  It works because it works, and for no other reason.

The dollar's value fluctuates over time, and yet people dont stop using it.  Hell, the value has declined by like 99% over the last century or so, and we still use it.

The value of everything fluctuates, all the time.  Bigger markets, like the dollar, tend to fluctuate more slowly, because they are big, not because they are magic.  Smaller markets, like bitcoin, tend to fluctuate more quickly, because they are small (and thus easier to move), not because they are flawed in some way.

To which answers are you referring? Let's see....a panel of Nobel Laureates was asked a similar question and gave similar answers regarding foreign exchange risk. Wait, but they're not members of the Bitcoin foundation so they're incredibly stupid....

I don't see much of an argument here unless being condescending is your mechanism for arguing? The dollar doesn't fluctuate very much relative to CPI, which is one reason people continue to use it.

Slow fluctuations make a currency much more usable (and define the usability of a currency, hence why Zimbabwe's currency wasn't so useful or why Argentines prefer the USD). If the price of corn is $1.28 now and will be $1.28 two hours later (or even two weeks later), that's certainly helpful. All currency may be nonsense, but the one constant to any 'good' currency is usability vis-à-vis stability. Bitcoin is not quite there yet.

If the price of a computer accessory is 1 BTC now and 1.5 BTC (or 0.5 BTC) one hour later, not nearly as helpful. The latter promotes hoarding, which further drives up the price and makes it even less usable.

Commodity markets are massive and they fluctuate wildly as well, so market size doesn't necessarily have very much to do with it. Bigger markets like the dollar fluctuate less because the Fed uses monetary policy (ineptly, sure) to at least attempt to control inflation/deflation. I'm no fan of the Fed so no need to offer your explanation against their methods. Bitcoin is deflationary by nature and will probably continue to fluctuate wildly because it derives its value entirely from the free-market a la the network-effect.

You are obviously a sound money advocate and not a stable money advocate. Give me one good reason I would want to risk a 13.5% fee (as would've been lost today using BTC to make a purchase from $166 to $146 including spread & BitPay fee) when I can use the USD for a 2.7% fee or make a free Paypal transfer? I am an advocate of calling Bitcoin what it is, an interesting investment that one invests in with the hope that at some future date it will become stable enough to be used as a currency.....and every libertarians dream. If it never becomes stable as a currency most will question its existence as a purely speculative investment.

Currently, foreign exchange risk is a major issue whether you want to admit it or not. I do agree that at some point it will be less volatile, but commodity markets are still quite volatile given their enormous size, lengthy existence and relatively predictable demand/supply characteristics.

[loanexpress]

I think you're missing an important point.

Yes, a lot of the bitcoin believers as you call them are hoarding and saving now. But as those bitcoins gain in value people are going to want to start spending them. For instance when BTC hits $1000 or above you can bet people want to start spending and buying luxuries with their new-found wealth. And all that value is already in BTC. Also the spenders would prefer staying in BTC and transacting directly rather than having to convert to USD and then having to answer awkward questions from the IRS etc.

So as a merchant, why would you not try and establish a foothold now in what is surely going to be a very profitable newly wealthy class of consumers?

[twolifeinexile]

Gosh, is this so hard to understand?
Dollar doesn't fluctuate relatively to CPI?
OF COURSE, because CPI is calculated based on DOLLARS!
All volatility is the relative,if you measure in dollars, then bitcoin price will be fluctuating forever (as everything else).

The foreign exchange risk will be there until bitcoin succeed. (Then it is not a "foreign" thing anymore).

So to use this argument to say bitcoin is problem is redundant --This is what bitcoin need no "conquer"

And choose your side, stop blame bitcoin, since it has to be this way until it is not.

[ArticMine]

It really depends on the cost of the credit card transaction. At one extreme one has a customer with good credit that has a 1% cash back credit card doing a card present transaction with a large merchant. In this scenario the merchant may be paying 1.6% or less fee and with the customer getting 1% back the effective cost is under 0.6%. There is simply no way BitPay with Bitcoin can compete here.

In the other extreme we have customer with poor credit using a prepaid debit card (cost to the customer can be easily be 5-10% by the time load fees are factored in) doing a small online transaction with a "high risk" merchant who may end up paying 10% or more by the time all the fees are factored in. The effective cost here can easily be over 20%. BitPay with Bitcoin wins hands down here.

When either the customer or the merchant are "high risk" the cost can easily exceed 10% and again BitPay with Bitcoin wins hands down.
Now for in person transactions the "high risk" problem is eliminated by using cash, but online Bitcoin becomes the only cost effective option.

I have said it before and will say it again the low hanging fruit for Bitcoin has a FICO score in the US under 600 and more in the 350 range and this is a large market in the US alone that is growing fast. Guess what happens to your FICO score after a mortgage foreclosure?