Mainstream merchant adoption leads do declining Bitcoin price?

[cryptovalues]

Merchant adoption has always been the Holy Grail of Bitcoin enthusiasts. Supposedly it should have lead so soaring Bitcoin price. But recent overlap of really major adoption (Paypal) and price slump shows that things are trickier.

The dynamics seems to be the exact opposite one: new high volume merchant will never hold bitcoin, due to obvious reasons. They will sell it the second they accept it. So basically it leads to Bitcoin sell-off through huge market sell orders, which are not matched by opposite buy orders, since no one is going to buy Bitcoin in order to pay using Paypal. Existing Bitcoin holders spend their coins, this is the main effect of mainstream merchant adoption.

Don't expect Bitcoin price to rise as new merchants jump on board. Only Wall street can push BTC higher now, but probably the time hasn't come yet.  $100-200 BTC price is realistic, Bitcoin economy will still work fine at this price level.

Wanna hear your opinion.

[hua_hui]

not exactly. Some countries are against BTC. The PPL are difficult to buy and sell bitcoin from the official channels. So many ppl in the world are closed to bitcoin. If the countries are open to it, the demand will be pushed higher.

[dothebeats]

Major merchant adoption drives the price down because they don't keep their profits in BTC, instead they trade it for fiat. Because of that, the price of the coins slowly deprive and no one would buy bitcoins to use Paypal. The adoption of a big player in the economy really helps bitcoin in terms of support and adoption, but the massive sell-off from these adopters is a problem in terms of bitcoin's price.

But then again, increased adoption helps bitcoin big time. B-)

[teukon]

Existing Bitcoin holders spend their coins, this is the main effect of mainstream merchant adoption.

Why did these bitcoin holders buy coins in the first place?  You are presuming a large demographic of people that considered bitcoins worth having when there was little merchant adoption but not worth having now that bitcoins are more widely accepted.

Besides, there's a far simpler explanation for the 2014 bear market: A correction to the 2013 bubble(s).

[superresistant]

Existing Bitcoin holders spend their coins, this is the main effect of mainstream merchant adoption.

Why did these bitcoin holders buy coins in the first place?  You are presuming a large demographic of people that considered bitcoins worth having when there was little merchant adoption but not worth having now that bitcoins are more widely accepted.
Besides, there's a far simpler explanation for the 2014 bear market: A correction to the 2013 bubble(s).

Exactly.
In case people didn't notice, we've been through the biggest Bitcoin bubble ever.
What goes up, must go down. The higher you go, the lower you'll fall.

[redwraith]

Merchant adoption has always been the Holy Grail of Bitcoin enthusiasts. Supposedly it should have lead so soaring Bitcoin price. But recent overlap of really major adoption (Paypal) and price slump shows that things are trickier.

The dynamics seems to be the exact opposite one: new high volume merchant will never hold bitcoin, due to obvious reasons. They will sell it the second they accept it. So basically it leads to Bitcoin sell-off through huge market sell orders, which are not matched by opposite buy orders, since no one is going to buy Bitcoin in order to pay using Paypal. Existing Bitcoin holders spend their coins, this is the main effect of mainstream merchant adoption.

Don't expect Bitcoin price to rise as new merchants jump on board. Only Wall street can push BTC higher now, but probably the time hasn't come yet.  $100-200 BTC price is realistic, Bitcoin economy will still work fine at this price level.

Wanna hear your opinion.

Most retailers use a payment processor like Bitpay or Coinbase. Because of this, the retailer doesn't even see the coin, it goes straight to the processor who then gives the retailer the fiat equivelant. When you buy at Newegg or Overstock, you're actually giving your bitcoin to Coinbase or Bitpay, who I wager are NOT dumping that coin, because they need as much as possible on hand to sell to others. They probably sell enough to keep some baseline ratio for their fiat/btc stores, but it does NOT mean that massive amounts of coin are being dumped because retailers accept bitcoin.

Actually, the recent drop in BTC probably has more to do with the surging dollar than anything...

[BJay87]

not exactly. Some countries are against BTC. The PPL are difficult to buy and sell bitcoin from the official channels. So many ppl in the world are closed to bitcoin. If the countries are open to it, the demand will be pushed higher.

The problem is countries (specially third world) are not open to it.

[chennan]

At the moment it is true. But when bitcoin goes to mainstream, bitcoin price is stable and anti-inflation. No matter the merchants or the holders tend to keep bitcoin. Many products are priced as bitcoin. More merchants adoption means the price is increasing.

[odolvlobo]

Most retailers use a payment processor like Bitpay or Coinbase. Because of this, the retailer doesn't even see the coin, it goes straight to the processor who then gives the retailer the fiat equivelant. When you buy at Newegg or Overstock, you're actually giving your bitcoin to Coinbase or Bitpay, who I wager are NOT dumping that coin, because they need as much as possible on hand to sell to others. They probably sell enough to keep some baseline ratio for their fiat/btc stores, but it does NOT mean that massive amounts of coin are being dumped because retailers accept bitcoin.

Actually, the recent drop in BTC probably has more to do with the surging dollar than anything...

Whether they are "dumping" the coins or not is irrelevant. Either way they must still sell all the coins in order to pay fiat for the merchants, and this selling creates downward pressure on the price.

I can see through my trading activities that user adoption has been very slow this year (maybe 10% - 20% of last year). It is clear to me that the combination of increasing merchant sales and slow user adoption is driving the price down.

I don't believe the rising dollar is a significant factor. The dollar has risen 10% against other currencies since May, but Bitcoin has fallen more than 40%. If the fall is due to the surging dollar, then you would expect the price of Bitcoin to be rising in other currencies, but it isn't.

[dothebeats]

We're not into 'mainstream' adoption YET. We can only say that we're into this 'mainstream' adoption when almost all things are also priced in bitcoin. Of course, the recent involvement of PayPal into bitcoin seems a good signal for bitcoin users about mainstream adoption, but PayPal is only a payment system/service. If merchants all over the world start to price their goods and services in bitcoin, then it's a good sign of mainstream adoption. Also, not many people in the world use bitcoin as a money, instead, they still treat it as a stock or an investment. Also, the massive sell-off of merchants that get paid in bitcoin is another factor of the decline in price. If almost all the services and goods in the world are also priced in bitcoin, then there's a good reason for the merchants to keep bitcoin as it is, and not trade for any other currencies to fund their businesses. :3

[IIOII]

Existing Bitcoin holders spend their coins, this is the main effect of mainstream merchant adoption.

Why did these bitcoin holders buy coins in the first place?  You are presuming a large demographic of people that considered bitcoins worth having when there was little merchant adoption but not worth having now that bitcoins are more widely accepted.

Besides, there's a far simpler explanation for the 2014 bear market: A correction to the 2013 bubble(s).

We can't prove that the price decline is triggered by mainstream merchant adoption with the merchants dumping bitcoin for dollars. I do not believe in this theory, because merchant adoption is increasing in general with some of the merchants keeping their bitcoin. Also I do not think that bitcoiners waited for more merchants to cash out (they could have done this earlier if they'd wanted to), instead I consider the majority of early bitcoiners being hardcore holders which rebuy Bitcoin any time they spend them. Why? Because they adopted Bitcoin to escape from the shortcomings of the current monetary system.

So it's reasonable to assume that the decline in price stems from an ordinary correction of the epic rise of 2013.

[odolvlobo]

So it's reasonable to assume that the decline in price stems from an ordinary correction of the epic rise of 2013.

A "correction" is a term that describes a phase of a market cycle. It does not cause the price to decline any more than daytime causes the sun to shine.

[IIOII]

So it's reasonable to assume that the decline in price stems from an ordinary correction of the epic rise of 2013.

A "correction" is a term that describes a phase of a market cycle. It does not cause the price to decline any more than daytime causes the sun to shine.

You're right. By "correction" I meant to say that the price is declining because those speculators are selling who initially drove the price to the previous highs. Those speculators are not real bitcoiners, because they quickly switch between different assets to generate USD profits. They don't care about the Bitcoin use case.

[Eisenhower34]

Existing Bitcoin holders spend their coins, this is the main effect of mainstream merchant adoption.

Why did these bitcoin holders buy coins in the first place?  You are presuming a large demographic of people that considered bitcoins worth having when there was little merchant adoption but not worth having now that bitcoins are more widely accepted.

Besides, there's a far simpler explanation for the 2014 bear market: A correction to the 2013 bubble(s).

We can't prove that the price decline is triggered by mainstream merchant adoption with the merchants dumping bitcoin for dollars. I do not believe in this theory, because merchant adoption is increasing in general with some of the merchants keeping their bitcoin. Also I do not think that bitcoiners waited for more merchants to cash out (they could have done this earlier if they'd wanted to), instead I consider the majority of early bitcoiners being hardcore holders which rebuy Bitcoin any time they spend them. Why? Because they adopted Bitcoin to escape from the shortcomings of the current monetary system.

So it's reasonable to assume that the decline in price stems from an ordinary correction of the epic rise of 2013.

I think higher merchant adoption is causing somewhat of our current price decline. I also believe it will be short term. The reason some people may have not sold their bitcoin would be they would need to give up privacy in order to do so (or risk getting scammed on places like LBC or the currency exchange section). I would argue that some people with, say 50 BTC might decide they want to "sell" 2 BTC to overstock (who would end up selling 1.8 BTC of this) in exchange for some goods on their website.

I would argue that over longer periods of time that merchants will start to discount prices for people paying in bitcoin which will result in more people buying bitcoin in order to take advantage of these discounts

[pitham1]

Existing Bitcoin holders spend their coins, this is the main effect of mainstream merchant adoption.

Why did these bitcoin holders buy coins in the first place?  You are presuming a large demographic of people that considered bitcoins worth having when there was little merchant adoption but not worth having now that bitcoins are more widely accepted.

Besides, there's a far simpler explanation for the 2014 bear market: A correction to the 2013 bubble(s).

We can't prove that the price decline is triggered by mainstream merchant adoption with the merchants dumping bitcoin for dollars. I do not believe in this theory, because merchant adoption is increasing in general with some of the merchants keeping their bitcoin. Also I do not think that bitcoiners waited for more merchants to cash out (they could have done this earlier if they'd wanted to), instead I consider the majority of early bitcoiners being hardcore holders which rebuy Bitcoin any time they spend them. Why? Because they adopted Bitcoin to escape from the shortcomings of the current monetary system.

So it's reasonable to assume that the decline in price stems from an ordinary correction of the epic rise of 2013.

I think higher merchant adoption is causing somewhat of our current price decline. I also believe it will be short term. The reason some people may have not sold their bitcoin would be they would need to give up privacy in order to do so (or risk getting scammed on places like LBC or the currency exchange section). I would argue that some people with, say 50 BTC might decide they want to "sell" 2 BTC to overstock (who would end up selling 1.8 BTC of this) in exchange for some goods on their website.

I would argue that over longer periods of time that merchants will start to discount prices for people paying in bitcoin which will result in more people buying bitcoin in order to take advantage of these discounts

The benefits start accruing to the merchants immediately. I wonder why they aren't passing on these savings to customers through discounts. 

[abrahamlitcoin]

What? It should be helpful to the bitcoin community.

[arbitrage001]

Merchant adoption has always been the Holy Grail of Bitcoin enthusiasts. Supposedly it should have lead so soaring Bitcoin price. But recent overlap of really major adoption (Paypal) and price slump shows that things are trickier.

The dynamics seems to be the exact opposite one: new high volume merchant will never hold bitcoin, due to obvious reasons. They will sell it the second they accept it. So basically it leads to Bitcoin sell-off through huge market sell orders, which are not matched by opposite buy orders, since no one is going to buy Bitcoin in order to pay using Paypal. Existing Bitcoin holders spend their coins, this is the main effect of mainstream merchant adoption.

Don't expect Bitcoin price to rise as new merchants jump on board. Only Wall street can push BTC higher now, but probably the time hasn't come yet.  $100-200 BTC price is realistic, Bitcoin economy will still work fine at this price level.

Wanna hear your opinion.

Don't forget 7200 BTC is being produced everyday. If miners as a whole only hold half and sell half, that still need around 1.35M dollars infusion everyday to keep price stable.

[kutaka]

3600 are produced daily I think....

[odolvlobo]

3600 are produced daily I think....

And it is only a small fraction of total exchange volume.

[NapoleonBonaparte]

3600 are produced daily I think....

And it is only a small fraction of total exchange volume.

It is one thing to trade the same coin back and forward for profit. Quite another to add 3600 coins into the circulation everyday.