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del
January 18, 2012, 10:18:03 AM
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Meni Rosenfeld
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January 18, 2012, 10:25:45 AM
 #2

Bit-Pay already offers instant conversion to USD, so merchants get the exact amount of USD they sold for (minus fees). Volatility for merchants is a solved problem, and it's important to make merchants aware that they can accept Bitcoin payments without ever owning a single bitcoin.

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January 18, 2012, 10:30:57 AM
 #3

if you're a merchant, you will most likely have to liquidate your income, buy whatever merch you're slinging and sell that for BTC.
i've held leveraged shorts to protect my BTC after I received larger orders,

I do not think it's the payment processors' obligation to hedge.

All I could ask is for them to ffwd a % of my incomings to mtgox, thill, bitcoinica (40/30/5) while keeping the rest as balance, thus keeping pressure of a SINGLE market when selling.

afaik you can open a sell-order @ 1 on mtgox so everything you send there will be sold automatically. If I could do this every X minutes, splitting up the 100s of BTC I sometimes receive over time, that'd be grand.

Bit-Pay already offers instant conversion to USD, so merchants get the exact amount of USD they sold for (minus fees). Volatility is a solved problem, and it's important to make merchants aware that they can accept Bitcoin payments without ever owning a single bitcoin.

also, what he said. only that their fees are prett-tty steep (3%) and I care not for your so-called "US-Dollars" - in fact, I can edge out an extra 5% by handling currency conversion myself.

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January 18, 2012, 12:25:52 PM
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i think you dint get my point, it needs to be the other way around USD to BTC not BTC to USD
Please explain, this isn't clear at all.

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January 18, 2012, 01:21:46 PM
 #5

item X cost 6 usd
the average price for 1 btc in last x days is 6 usd

the market go nuts

case 1
1 btc on the purchase moment cost 7$
client pay 6 usd merchant get 1 btc
payment processor have 1$ temporary lose

case 2
1 btc on the purchase moment cost 5$
client pay 6 usd merchant get 1 btc
payment processor have a temporary gain of 1$
Going by the average rate is stupid. The merchant should always use the current rate, anything else is an invitation for dutch booking.

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January 18, 2012, 01:39:27 PM
 #6

is a example, taking average or the price from last 3 min it does not the point
there is a need to hedge price volatility

edit: the current way BTC to USD is quite stupid because the BTC customer base is small but the other way around USD-> BTC is huge everybody* have a credit card and if a merchant wants to get BTC the "classic" way that is a pain in the ass

wat


the way I see it now, if I am taking BTC as a merchant I *am* taking the risk, so I guess what OP is saying is correct.

I remember when BTC spiked >7 early January, I got orders for >4000€ within two days.
With my payment processor taking 6 conirmations, bitmarket.eu taking another 5 or so, mtgox I don't know how many, it took almost 8h from the BTC to travel from my customers' wallet to mine (or mtgox, where ever). In the meantime, I was at risk. Had the BTCUSD dropped 5% in that time, this would've made the whole business venue unprofitable.

So I shorted a couple BTC on bitcoinica @ 5:1 and had at least a little of my risk reduced.

(aside: The spread on bitcoinica is unbelieveable bad. As soon as markets get volatile, the spread almost doubles. I'v seen spreads like 6.68 / 7.04... ALMOST FIVE PERCENT! wtf?)

I think no payment processor would want to internalise that risk
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January 18, 2012, 01:44:12 PM
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You can hedge using options here: http://polimedia.us/bitcoin/options.php (I am not associated with this site)
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January 18, 2012, 03:10:52 PM
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I think no payment processor would want to internalise that risk
They don't internalise that risk. They make a one-time purchase of some BTC and keep it on the exchange (if the exchange offers selling on margin even that much isn't necessary). When they receive bitcoins on behalf of a merchant they sell the corresponding amount on the exchange immediately, and receive exactly the dollar amount they owe to the merchant. Then they can at their leisure transfer the bitcoins to the exchange to replenish their balance.

This way they don't suffer at all from daily fluctuations. They could suffer from long-term depreciation of their investment (again, only if they're holding BTC rather than selling on margin), but a business of this kind is likely to be long on BTC anyway.

The investment in BTC or collateral only needs to correspond to the total payment processed in the hour or so it takes to get bitcoins to the exchange, which is bearable.

This is all what I think they should do, I don't know how Bit-Pay specifically actually does it.

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Bitcoil - Exchange bitcoins for ILS (thread)   |   Israel Bitcoin community homepage (thread)
Analysis of Bitcoin Pooled Mining Reward Systems (thread, summary)  |   PureMining - Infinite-term, deterministic mining bond
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