Discussions of Bitcoin have, fascinatingly, dominated the spheres of both financial and tech communication online for the better part of December. With the sudden explosion in the value of the Bitcoin digital cryptocurrency, it’s understandable that people just catching wind of the currency responsible for overnight millionaires and weekend bankruptcies might be tempted into investment by its sudden seeming viability. Bitcoin, however, is one of the most volatile investments on the web – even if that volatility is upward trending for now.
With so much attention on Bitcoin, more and more merchants are willing to accept Bitcoin as payment in exchange for their products. Bitcoin, as of the writing of this article, sits at a whopping $18,750 per coin according to CoinBase, which also reports an incredible percentage growth of the cryptocurrency. Since the end of 2016, Bitcoin has increased in value by over 2000%, and it is now valued higher than it has ever been before by far. BitCoin’s $500 valuation was once considered unbelievable, especially considering that many who got in early mined or bought great sums of coins which are now largely sold in fractions.
In the flurry, though, it can be hard to answer whether Bitcoin is a wise currency to bank on, or whether every accepted Bitcoin is just a gamble in disguise.
Bitcoin’s Relevancy for ECommerce Merchants
The great question for web-savvy eCommerce merchants seems to be one of whether or not to accept Bitcoin as a default payment option. The idea of being paid in a currency that is growing rapidly in value is undeniably appealing. It is important, however, for eCommerce merchants to consider carefully the risks of Bitcoin.
First, there is the paradox of currency management that comes with Bitcoin. One of the selling points of Bitcoin is that it is a virtually unregulated currency. Created and sustained by encrypted blocks of data and algorithms, Bitcoin in its basic form is almost untraceable. While some unsavory operators have used this to enable criminal activity, it is largely used as a simple security measure; thieves can’t steal a credit card number if it doesn’t exist. Paying with Bitcoin is secure and anonymous such that only meta-data can really be used to track transactions, and even that can be obscured if a user commits to it.
Being unregulated and anonymous though brings a lack of convenience. Transactions can take a long time, especially if you’ve been away from your computer for a while or haven’t done any transfers in some time. Sometimes, the value of Bitcoin will have changed in the time it takes to verify a payment, meaning the total will have to be adjusted and verified again. To overcome these issues, many Bitcoin banks and exchanges arose.
Thus, the paradox. An unregulated currency which grew in popularity because of its unregulated nature now is being tracked and regulated by large organizations. The first large exchanges, unfortunately, ended up displaying the risk of such structures unfortunately quickly. One of the best examples of this was MTGOX, a Bitcoin exchanged used by thousands of users with assets in the hundreds of millions that disappeared overnight when one of their organizers took the Bitcoin (now untraceable) and ran. The fallout was stunning. Millionaires who traded in Bitcoin went bankrupt overnight, and the value of the currency plummeted.
However, since those early events, the value of Bitcoins has skyrocketed, surpassing the original value by over ten thousand dollars per coin. Additionally, exchanges like Coinbase have arisen, which are used and backed by major corporations like Microsoft and provide features similar to those present on formal stock-trading and banking websites.
So, what does this all mean for Bitcoin in eCommerce? What it boils down to is that eCommerce entrepreneurs should not bank on Bitcoin in full. Currencies tied to major world powers are still by far the most stable and reliable currencies to accept. While all currency values fluctuate, Bitcoin seems to frequently be in some form of upheaval. This can mean huge profits or huge losses.
For now, though, accepting Bitcoin through a safe exchange like Coinbase might prove to be the best answer for eCommerce merchants. This allows them to win over the increasingly large demographic of Bitcoin users without sacrificing the ability to instantly trade their coins for USD, CAD, Euros, or Pounds. Unlike MTGOX, Coinbase is too tied to traditional banking to pull a con of that caliber, so the risk seems, at least for now, to be very low in using services like Coinbase.
Utilizing safe exchanges seems to act as a buffer, allowing merchants to potentially draw on the massive growth of Bitcoin value while minimizing the risks to be had from market crashes. ECommerce merchants can hold on to Bitcoins while the currency is on the rise and sell them off if the price starts to plummet.
Bitcoin may not be the digital diamonds that some have made it out to be, but it is only fool’s gold to those who mistake it for gold. Used responsibly, it can bring new buyers to your site and maybe make a little bit extra on the side by means of value increase.
If you want to integrate a Bitcoin payment processor onto your site, contact www.Nixa.ca today. Our team is ready and waiting to help eCommerce merchants safely accept Bitcoin so they can open their doors to the buzz of the tech-financial world.