Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?



Bitcoin's Publicity-Minded Proponents Could Be Its Savior

  +Follow December 9, 2013 12:05PM
Tickers Mentioned:

On Dec. 6 China’s top search engine Baidu Inc (BIDU) announced they would stop accepting the red-hot cryptocurrency bitcoin as payment. The cessation is a blow for bitcoin proponents, who, however bullish, understand that bitcoin cannot maintain its valuation as a purely speculative instrument, and to have longevity and stability must gain market liquidity.

In short, to function as an actual currency at some point, Bitcoin must  be able to be accepted on a truly wide scale for a variety goods and services, which it currently cannot claim to do.

Baidu is Protecting their Bottom Line

While Baidu’s suspension of bitcoin payments was certainly spurred by China’s central bank barring financial institutions from handling BTC transactions, the underlying issue is bitcoin’s extreme volatility.

In the statement announcing the suspension of bitcoin payments, Baidu cited not the recent Chinese government actions against bitcoin, but that the “recent large fluctuations in Bitcoin’s value makes it unable to safeguard users’ interests.”

They’re right about fluctuations hurting someone in the transaction, but at that moment it wasn’t  the users they were protecting. More likely, Baidu was protecting themselves. The fact that when a bitcoin’s price does things like lose half its value in a couple days (as it did just prior to Baidu’s announcement,) a company accepting bitcoin as payment gets the shaft.

Like any company, they’re looking at the immediate bottom line, and revenue that has the chance of devaluing by 50 percent in one weekend is not a risk worth taking.

Extremely Volatile Money is Not Money, it’s a Sandbox for Daytraders

Bitcoin proponents tend to forget that a currency that is too volatile is not much use as a currency. It has use as a speculative vehicle for amateur forex players, to be sure, but not as a viable means of exchange.

For instance, think about what it means to actually spend a currency if it is rapidly increasing in value. Let’s say that one day, fifty bitcoins could buy one Tesla (TSLA) Model S car. If bitcoin continued surging as it had the two months prior, why on earth would a person spend their “money” on a Tesla when in a month, those same fifty bitcoins could buy two Teslas?

Or look at it from the perspective of the seller. A currency that is not liquid enough to fight off speculative binges is prone to sudden, unexpected price drops. Let’s say the dealer sells that Tesla for fifty bitcoins, and then the next day the price of bitcoin is halved after a trader sell-off exacerbates a panic. That dealer just sold their Tesla for half its value, and thus got royally screwed.

Whether upswing or downswing spending of a bitcoin is a dicey proposition for either side of the deal, with the current trend favoring the holder of the bitcoin. In most cases, this means instead of spending, people tend to save their bitcoins and hope they go up in value (which, due to their deflationary design, is normally their natural tendency.) This hesitancy to spend and to hold and wait for the value to go up creates systemic hoarding, thus favoring early adopters in a pyramid-type economic structure, eventually leading to depressions and bust-outs.

Macroeconomics aside, why are companies currently accepting a payment whose “correct” valuation, no matter how bullish or bearish, must currently be considered quite uncertain?

 “(X) is Now Accepting Bitcoins”

As bitcoin increased in value 89-fold this year, a bevy of companies began accepting it as a form of payment. OKCupid, Baidu, Virgin Galactic, and yes, a Tesla dealer began taking bitcoin in lieu of US dollars. There are hundreds more that are “now accepting bitcoin,” mostly local businesses or tech startups.

From a business perspective, it doesn’t make sense. Why risk pricing your goods and services in bitcoin, when the correct price of a bitcoin is currently anybody’s guess?

Because bitcoin traffic is still relatively insignificant, almost any time some business, no matter how small, begins accepting bitcoin, it makes the news. “Now accepting bitcoin” announcements routinely appear on the front page of the bitcoin subreddit, a very popular gathering place for bitcoin aficionados, and attracts more business – via bitcoin or US dollars.

At this point in its history, accepting the volatile bitcoin as payment is not a wise business decision – at least from a bottom-line perspective. But it does buy that great intangible of publicity.

Being on the cutting edge is not cheap. For smaller tech startups, accepting bitcoin as payment is worth the risk in return for getting traction in the bitcoin (read: tech) subculture, and beyond. For larger companies… well, Virgin has a knack for publicity stunts, and Richard Branson is, if nothing else, a consummate self-promoter. Ditto for Snoop Dogg/Snoop Lion, who is trying to sell his new album for bitcoin.

The interesting thing is, the more people look past the very basic economic complications of accepting payment in bitcoins, the more it might eventually begin to actually stabilize via increased liquidity. This in turn, could help break the cycle of volatility.

Like any emerging market, this will take years and years and years to happen. But it doesn’t mean it can’t.

The Key for Bitcoin’s Viability is “Correct” Pricing

Bitcoin’s deflationary bias means it cannot probably ever function properly as a major currency (for an illustration of the massive economic problems that arise from deflation, look at Japan over the last 20 years.) But there are aspects of bitcoin that are extremely attractive, like its ability to facilitate international trade and its lack of service fees, and it certainly has a future as an alternative investment vehicle.

Bitcoin’s most bullish proponents are a little misguided about the feasibility of bitcoin ever competing with or replacing the world economic superpower’s paper currencies. But its publicity-minded proponents could help push bitcoin through this infant stage and greatly increase popular usage.

If trade increases, it will help the market “discover” the stable price of bitcoin in relation to goods and services. Then and only then will bitcoin become a viable alternative method of trade, and not just a speculative house of cards.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Liked What You Read? Join Equities.com as a contributor and get eyeballs on your content FOR FREE!

Results for BIDU
Anacott Steel
29 May 15 07:10:29
Who am I to complain with brain fart $BIDU trade tweeted yesterday - slight gain - with $SPLK trades? #reality #shithappens
Option Voyeur
29 May 15 07:01:41
$BIDU heading lower
29 May 15 07:00:04
#sentishiftup $CL $QQQ $LLY $BABA $CVX $DIA $TUBE $CVC $DXJ $BIDU #sentiquant 20150529 10:00:04:981
29 May 15 06:57:33
RT @StockTwits: Want to play the stock market boom in China? Here are 24 Chinese stocks that all trade on US exchanges -> http://t.co/IOf8k…
Sireli Tagicakibau
29 May 15 06:55:55
RT @BPGAG: Out $BIDU short - slight gain on add.
29 May 15 06:52:09
XLV Health Care Select Sector SPDR Investor Opinions http://t.co/2iAbTLLr2w $XLV $BIDU $GDX $JDST #XLV #finance #pennystocks
Jay Smith
29 May 15 06:51:02
RT @StockTwits: Want to play the stock market boom in China? Here are 24 Chinese stocks that all trade on US exchanges -> http://t.co/IOf8k…
29 May 15 06:50:38
XLP Consumer Staples Select Sector SPDR Ideas http://t.co/ZYXWn2q6t1 $XLP $AAPL $XLF $BIDU #XLP #tradeideas #investing
Investors Hangout
29 May 15 06:48:06
UNG United States Natural Gas Fund Volume http://t.co/DdwYxkekgk $UNG $BIDU $DUST $JNUG #UNG #invest #finance
Lucky Jimmy
29 May 15 06:47:40
UNG United States Natural Gas Fund Exchange http://t.co/DwuLvZmFoH $UNG $BIDU $KO $AMBA #UNG #stockmarket #investing
Investors Hangout
29 May 15 06:47:35
UGAZ VelocityShares 3x Long Natural Gas ETN Summary http://t.co/l0WMAQoI5F $UGAZ $RSP $BIDU $BABA #UGAZ #tradeideas #investing
Trade Followers
29 May 15 06:47:00
$BIDU was one of the most bullish stocks on Twitter over the past two weeks. https://t.co/mIyyf47Vck
29 May 15 06:45:05
SGY.TO Surge Energy Inc. Investor Opinions http://t.co/UyvdQIuP6i $SGY.TO $PBR $ESPR $BIDU #SGY.TO #stocks #finance
29 May 15 06:44:42
RMRK Rimrock Gold Corp. Prev Close http://t.co/Azfz0myXd3 $RMRK $BIDU $DCTH $UGAZ #RMRK #tradeideas #stock
29 May 15 06:44:35
RE.TO Rock Energy Inc. Company Info http://t.co/sIOgYs0mnZ $RE.TO $BAC $AVGO $BIDU #RE.TO #investing #invest
29 May 15 06:43:40
PCLN http://t.co/s581I1HWrR Inc. Volume http://t.co/HjS8oPlZ7P $PCLN $BRWC $GEVO $BIDU #PCLN #nasdaq #finance
Anacott Steel
29 May 15 06:43:30
Clearly I had a brain fart (stupid) on $BIDU quick trade. Hope you enjoy the gains.
29 May 15 06:43:18
PBR Petroleo Brasileiro (Petrobras) Last Price http://t.co/3sTrvxkPmJ $PBR $GPRO $CVX $BIDU #PBR #investing #stocks
29 May 15 06:43:16
OPXA Opexa Therapeutics, Inc. Shares http://t.co/avAw1EZWvn $OPXA $GDX $BIDU $DUST #OPXA #finance #invest
29 May 15 06:43:15
ONTY Oncothyreon Inc. Investor Opinions http://t.co/nOr3NZl2jx $ONTY $YINN $SGNL $BIDU #ONTY #stockmarket #share
29 May 15 06:42:08
NPWZ Neah Power Systems Inc. Quotes http://t.co/0YEXJkNCXn $NPWZ $BIDU $FXC $PHM.V #NPWZ #investing #invest
Rosner Stocks
29 May 15 06:40:38
JDST Direxion Daily Junior Gold Miners Index Bear 3X Shares Quotes http://t.co/9CXej3m5Gr $JDST $ERY $BIB $BIDU #JDST #finance #invest
29 May 15 06:40:35
JPM J.P. Morgan Chase & Co. Ask Size http://t.co/FWiL6mZoGC $JPM $SBUX $BIDU $IBM #JPM #tradeideas #stocks
Long-Short Hedgie
29 May 15 06:40:32
RT @StockTwits: Want to play the stock market boom in China? Here are 24 Chinese stocks that all trade on US exchanges -> http://t.co/IOf8k…
29 May 15 06:39:07
HGD.TO Horizons BetaPro S&P/TSX Global Gold Bear Plus ETF 52Wk High http://t.co/Sva9rJn2Gx $HGD.TO $BIDU $TWTR $EPAM #HGD.TO…
Lucky Jimmy
29 May 15 06:37:34
FXI iShares FTSE China 25 Index Fund 52Wk High http://t.co/9cBiuZBIos $FXI $TRQ $UWTI $BIDU #FXI #stock #invest
29 May 15 06:37:12
EA Electronic Arts, Inc. Dividend http://t.co/3yQfEQ7oFr $EA $BIIB $SVXY $BIDU #EA #stocks #stockmarket
Guru Algo Trading
29 May 15 06:37:08
RT $TSLA Algos triggered BUY in SIGMA-X, CROSSFINDER, ATS, LX @ 09:37, P/T 255.00 $GOOG $TWTR $BIDU $GPRO $NFLX $AAPL $FB $QQQ #HFT #Quant
29 May 15 06:36:06
EBAY eBay, Inc. Stock Message Board http://t.co/djctMkUEux $EBAY $BIDU $CSIQ $AMRN #EBAY #nasdaq #investing
29 May 15 06:35:07
CSCO Cisco Systems, Inc. Prev Close http://t.co/fHNCy6klku $CSCO $VGTL $SLV $BIDU #CSCO #investing #share
Sweet Alpha
29 May 15 06:35:05
BIDU digital report for May 29th, 2015 $bidu http://t.co/BUJxhZsRzw
Anacott Steel
29 May 15 06:35:01
Out $BIDU short - slight gain on add.
29 May 15 06:34:24
BIDU Baidu, Inc. Financials http://t.co/AmbWe6edyk $BIDU $EBAY $PANW $NKE #BIDU #tradeideas #stocks
29 May 15 06:34:20
BIDU Baidu, Inc. Message Board Posts http://t.co/bPt9YoLXSi $BIDU $PCLN $IWM $RE.TO #BIDU #nasdaq #stock
29 May 15 06:34:16
BIDU Baidu, Inc. Message Board Posts http://t.co/qUALjOavY0 $BIDU $SOXL $AHFD $DCTH #BIDU #nasdaq #stockmarket
29 May 15 06:34:15
BIDU Baidu, Inc. Shares http://t.co/YiiNstSb9i $BIDU $GILD $CSIQ $UWTI #BIDU #stock #nasdaq
29 May 15 06:34:14
BIDU Baidu, Inc. Day Low http://t.co/rDjxtsYN5z $BIDU $FSI $AMBA $BAC #BIDU #share #invest
29 May 15 06:34:14
BIDU Baidu, Inc. Open http://t.co/ssY6jEXLNH $BIDU $JNUG $BAC $AVEO #BIDU #share #finance
29 May 15 06:34:14
BIDU Baidu, Inc. E.P.S. http://t.co/O81hlUz5zD $BIDU $EEM $AVGO $SDS #BIDU #stockmarket #tradeideas
29 May 15 06:34:08
BIDU Baidu, Inc. Investor Opinions http://t.co/tPUaIp77sq $BIDU $AXP $QEDN $OHGI #BIDU #stock #tradeideas
29 May 15 06:34:07
BIDU Baidu, Inc. % Change http://t.co/DmKcvMy0Ns $BIDU $VALE $EYES $XLY #BIDU #share #tradeideas
29 May 15 06:33:15
BAA Banro Corp. Day Low http://t.co/Lacu9Fc3VU $BAA $VEEV $ASHR $BIDU #BAA #stock #nasdaq
Rosner Stocks
29 May 15 06:33:13
BIDU Baidu, Inc. Stock Message Board http://t.co/YWPfCXNTIh $BIDU $HNU.TO $XLP $TWTR #BIDU #investing #stock
29 May 15 06:33:10
BIDU Baidu, Inc. Prev Close http://t.co/ePYlc9GX7V $BIDU $XLP $MCD $GME #BIDU #pennystocks #share
Lucky Jimmy
29 May 15 06:33:07
AMBA Ambarella, Inc. % Change http://t.co/zFI1jAYSIp $AMBA $BIDU $JCI $URI #AMBA #stock #nasdaq
IH News Desk
29 May 15 06:33:07
BAA Banro Corp. Summary http://t.co/d7ct0XLqRG $BAA $XLY $BIDU $TSLA #BAA #invest #investing
29 May 15 06:32:47
ADMD Advanced Medical Isotope Corp. Message Board Posts http://t.co/OW2bluxsDE $ADMD $CCO.TO $FXC $BIDU #ADMD #share #share
Rosner Stocks
29 May 15 06:32:08
AAPL Apple, Inc. Shares http://t.co/x1AQboMxRH $AAPL $DATA $BIDU $UUP #AAPL #tradeideas #nasdaq
Investors Hangout
29 May 15 06:31:36
ACWI iShares MSCI ACWI Index Fund Summary http://t.co/sKh3L42WDj $ACWI $BIDU $UVXY $TVIX #ACWI #nasdaq #stocks
29 May 15 06:31:18
ABC AmerisourceBergen Corp. Short Sales http://t.co/rO5ei2qqhO $ABC $VGTL $BIDU $TWTR #ABC #investing #stocks
  +Follow December 9, 2013 12:05PM



blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.

Login or Register