Getting Merchants to KEEP Their Bitcoin

[daviducsb]

So now we have more merchants, like Overstock, accepting Bitcoin.

However, most of them use either Coinbase or Bitpay to immediately convert their Bitcoin stash to fiat.

For Bitcoin to grow, I would think that instead of just being a convenient means of transfer, it needs to become accepted as a legitimate store of value. How can we achieve that if merchants immediately trade it for fiat? Is there a way we can incentivize merchants to keep some of their reserves in Bitcoin? Right now I am sure Patrick Byrne, the ceo of Overstock, owns some bitcoin. However, Overstock doesn't. How do we develop more bitcoin--->bitcoin trade, instead of fiat--->bitcoin-->fiat?

[hilariousandco]

So now we have more merchants, like Overstock, accepting Bitcoin.

However, most of them use either Coinbase or Bitpay to immediately convert their Bitcoin stash to fiat.

For Bitcoin to grow, I would think that instead of just being a convenient means of transfer, it needs to become accepted as a legitimate store of value. How can we achieve that if merchants immediately trade it for fiat? Is there a way we can incentivize merchants to keep some of their reserves in Bitcoin? Right now I am sure Patrick Byrne, the ceo of Overstock, owns some bitcoin. However, Overstock doesn't. How do we develop more bitcoin--->bitcoin trade, instead of fiat--->bitcoin-->fiat?

Maybe some will, but we need to get more other merchants and services to accept it first so it's a vicious circle really. Most retailers won't be able to take the gamble on the price fluctuations, but accepting Bitcoin is better than nothing even if they do turn it straight to fiat. If retailers could pay their employees and suppliers and bills in Bitcoin, then they might hold on to it. Some smaller businesses may keep some as an investment, but I guess that's up to them and their circumstances.

[dontek]

Get their creditors and employees to accept Bitcoin as payment for their goods/services. Other than that, why would Overstock hold onto Bitcoin if they as a company can't use it to pay their bills or employees? They won't.

[daviducsb]

Get their creditors and employees to accept Bitcoin as payment for their goods/services. Other than that, why would Overstock hold onto Bitcoin if they as a company can't use it to pay their bills or employees? They won't.

Maybe they would if they looked at the chart and saw a more steady, less volatile rise in value? Companies do hold assets like real estate and bonds that they don't necessarily use to pay their employees, so why not hold some Bitcoin?

[lucaspm98]

As a merchant, I know that I am keeping all my sales in Bitcoin since I am a true believer in the cryptocurrency and don't have any investors expectations to meet, but for most business it is too much of a risk to stay invested in a highly volatile currency that can swing 20% or more in a single day. However, I do believe there will be more merchants that will at least start keep a small percentage of the Bitcoin as it becomes less mysterious.

[virtuexru_shibe]

Most retailers won't be able to take the gamble on the price fluctuations

nail on the head imo

[Enkel]

Part of the problem for an overstock.com type retailer is that they have to settle out their books for tax purposes on a quarterly (maybe monthly?) basis. As an example, sales taxes are submitted monthly. They need to convert the BTC to stick it to a number if the value is rising, since they'd rather submit sales taxes on $100 than $150. I imagine their book keeping staff are having a great time with the sort-of rapid flux in the BTC value.

[Littleshop]

Part of the problem for an overstock.com type retailer is that they have to settle out their books for tax purposes on a quarterly (maybe monthly?) basis. As an example, sales taxes are submitted monthly. They need to convert the BTC to stick it to a number if the value is rising, since they'd rather submit sales taxes on $100 than $150. I imagine their book keeping staff are having a great time with the sort-of rapid flux in the BTC value.

Not a problem for a retailer if they work in USD (or other local currency) even if they keep Bitcoin on the backend.  They pay the taxes the customer paid.  If they have a gain/loss after they may have to deal with that separately. 

[doof]

It'll happen, they will start to offer staff part of their wages in BTC...

[pening]

Bitcoin cannot move up a gear until major retailers accept the actual Bitcoin directly.  Right now, Bitpay is just another payment processor facilitating a foreign currency.  A cynic might say those companies using it are looking for publicity and easy money from a demographic that have a lot of spare currency they cant spend elsewhere.  

[Enkel]

Part of the problem for an overstock.com type retailer is that they have to settle out their books for tax purposes on a quarterly (maybe monthly?) basis. As an example, sales taxes are submitted monthly. They need to convert the BTC to stick it to a number if the value is rising, since they'd rather submit sales taxes on $100 than $150. I imagine their book keeping staff are having a great time with the sort-of rapid flux in the BTC value.

Not a problem for a retailer if they work in USD (or other local currency) even if they keep Bitcoin on the backend.  They pay the taxes the customer paid.  If they have a gain/loss after they may have to deal with that separately. 

But, if they don't convert to USD (or a currency of some sort) fairly quickly (as in the payment processor returns USD), doesn't the transaction become a barter transaction instead of a direct sale? There isn't anything wrong with barter transactions, but it brings in new paperwork and having to substantiate the 'value' at the point of sale (There's over a $100 spread in values right now if you look at different exchange sites. -- MTGox = $903 ... Coinbase sell = $803 that's a huge difference when you're looking at tens of thousands of dollars a day.)

[daviducsb]

It would be interesting to find out how many actual Bitcoins Bitpay and Coinbase have to keep on hand as they grow. Maybe that is an overlooked positive aspect to their growth.

For instance if Coinbase one day has to keep $1,000,000,000 worth of bitcoin on hand, that will be bitcoin out of circulation and thus increase the scarcity. Probably wishful thinking Would be informative though to figure out how they are set up. Just thinking out loud.

[markm]

It seems kind of short-sighted, maybe in a sense "stupid" for a huge major retailer to accept bitcoins without stockpiling a bunch of the first.

Afterall if by your action of accepting them you increase their value significantly wouldn't it make sense to capture some of that increase yourself?

It seems like a positive feedback loop should arise, whereby the more they promote it and the more their customers use it convert to it adopt it and so on the more profit there would be in holding lots of it...

Also the volatility can be harnessed too: place highball sell offers so you cash in when the exchange rates go high, convert incoming bitcoins into fiat faster when exchange rates go low, depending on how fast you need the fiat and how large your buffer has grown.

Pretty soon you could have a nice extra earnings department just in buying low and selling high.

-MarkM-

[Enkel]

It seems kind of short-sighted, maybe in a sense "stupid" for a huge major retailer to accept bitcoins without stockpiling a bunch of the first.

Afterall if by your action of accepting them you increase their value significantly wouldn't it make sense to capture some of that increase yourself?

It seems like a positive feedback loop should arise, whereby the more they promote it and the more their customers use it convert to it adopt it and so on the more profit there would be in holding lots of it...

Also the volatility can be harnessed too: place highball sell offers so you cash in when the exchange rates go high, convert incoming bitcoins into fiat faster when exchange rates go low, depending on how fast you need the fiat and how large your buffer has grown.

Pretty soon you could have a nice extra earnings department just in buying low and selling high.

-MarkM-

I think that they'd probably have to look at how much of this they were doing because it sounds like it is venturing into investment banking areas if they are holding TOO much BTC for the purposes of doing what might be very close to day-trading. For example, if they started just buying and selling real estate as an investment (instead of a by-product of opening retail locations), they would probably end up triggering REIT regulations.

[Melbustus]

This: http://www.businesswire.com/news/home/20140113006504/en/BitPay-Announces-Bitcoin-Payroll-API
...plus a sufficiently liquid and clearly regulated futures market for bitcoin will do it.

[Keyser Soze]

I cannot see most merchants holding on to the coins until the currency risk is greatly reduced (virtually non-existent) or there are other ways to mitigate those risks.

[johnyj]

Merchant will soon reach a consensus that if they never sell received coins but use them, they will support the exchange rate and eliminate the downside risk of exchange rates

Daily fresh coin supply is 5000-7000, means if 5000-7000 coins were used to purchase goods/services (around 4-6 million USD, ebay does 13 million per day) and never converted back to fiat money, then there will be no coins for sell on exchanges, means any amount of buy will raise the exchange rate dramatically

In fact, accepting bitcoin payments works just like purchasing coins from exchanges, but won't affect the exchange rate, could be a good way to acquire large amount of coins

[BTCisthefuture]

Maybe someday,  we aren't there until volatility decreases.  It's simply not practical to hold revenues in something that is do volatile as bitcoin when you have expenses and bills that need to be paid on time.

If you're a smaller mom and pop type shop you might be more interested in keeping a portion of your revenues in bitcoin, treating it as an investment on your business.  However,  it's unlikely you will see large publicly traded companies do such a thing when they have to answer to their stock holders.

[Rannasha]

Most of these merchants have a pretty low profit margin once you deduct all costs. So unless their suppliers and/or employees start accepting Bitcoin, the merchant simply can't keep his coins since he needs most of what comes in to pay supplier/employees/etc...

[kjlimo]

They'll keep bitcoin when they have a business reason to do so.

If things keep growing, that business case will present itself.