It's interesting to think what announcement like this have in aggregate on the price of bitcoin. Counter-intuitively the price of bitcoin should face downward pressure as merchant adoption of this sort increases. Expedia doesn't hold any of the bitcoin they receive. The bitcoins are instantly converted to dollars on a market exchange. This means that holders of bitcoin, especially those who are sitting on large capital gains, now have a new outlet to realize their gains.
On the other hand merchants who choose to accept bitcoin using Coinbase (or Bitpay) and who also choose to keep some fraction of their profit in bitcoin (thereby exposing their profits to currency volatility, which may even be a good thing for growth of their profits) will tend to increase the market price of bitcoin.
Overall it seems like most merchants accepting bitcoin are not holding any of the bitcoins they accept. It would be great to see more merchants choosing to keep some fraction, however small, in bitcoin itself.
I suspect that, arguably more counter-intuitively, it will push the price up, fed by increased speculation due to apparent signs of Bitcoin "going mainstream" that will far exceed any actual Expedia transactions taking place.
I'm more intrigued by the commercial decision from Expedia's perspective. Presumably they've done a back of the envelope calculation and decided "group of people more likely to pick Expedia over other OTAs if they can use Bitcoin" > "group of people that will be sufficiently confused by an additional payment option to abandon their cart"
> I'm more intrigued by the commercial decision from Expedia's perspective.
I suspect pure marketing. A mainstream player announcing support for bitcoin is still newsworthy. In another year, probably not so much as there will have been a series of such announcements by then.
Even if they don't do a single bitcoin transaction, the coverage and back-links will more than cover the cost of integration, and any resulting bit coin transactions (that don't replace a more traditional form of payment) are upside.
Yea--some Harvard MBA making a name for themselves? I wish
I wasn't so cynical. I sincerely hope crypto currencies annihilate the credit card industry. I guess any publicity
is good publicity?
Yea--some Harvard MBA making a name for themselves? I wish I wasn't so cynical.
It's not cynical. Accepting bitcoin as payment isn't beneficial right now. There's no benefit for merchants, because it's instantly converted back to traditional currency. There's no benefit for consumers, because consumers have to buy bitcoin in order to spend bitcoin, and buying bitcoin means consumers have to manage their own wallet or store their money in a third party service that can fail or steal their money at any time.
The singular benefit is the publicity your business gets by accepting bitcoin. In other words, bitcoin is trendy.
This isn't a dismissal of bitcoin. History has shown that trends are a powerful force. If it achieves a kind of critical mass, then that will open up other avenues for bitcoin to become useful. But in the meantime, be assured that your gut instinct of "there doesn't seem to be any reason to accept bitcoin except publicity" is spot on.
As an aside, I think these announcements won't affect the fundamental price of bitcoin. They'll cause fluctuations, but not any long-term rise or fall. The price of bitcoin is driven by speculation. It always has been, and always will be. The fundamental price at any given time is due to speculators with large amounts of bitcoin who place large buy orders in hopes of getting other speculators to place large buy orders, then they sell. From a game theory point of view, if a bunch of gamblers all place large buy orders, the first gambler to sell stands to profit, and the other gamblers will lose out. You can see the evidence of this at any time: http://i.imgur.com/SYHhSCv.png ... A gambler buys a bunch of bitcoin, which causes other gamblers to buy a bunch of bitcoin, which lets the first gambler sell off their position and make out handsomely.
There's no long-term speculation going on. Or, if there is, then the long-term speculation is being done by a few dozen people with massive bitcoin holdings. No one else's speculation is a significant price mover.
It's true that the market responds to announcements, but it's not true that the market price is driven by announcements. They just serve as a trigger for gamblers to initiate gambles. Hence, I don't think the fundamental price will shift very much; what shifts the price is when large players enter or exit the market, which happens much more rarely than announcements do.
> Accepting bitcoin as payment isn't beneficial right now. There's no benefit for merchants, because it's instantly converted back to traditional currency.
I see two advantages: 1) They get their name in the news (and in consumers minds), and 2) they get the bitcoin spenders that they may not have otherwise (an admittedly small bump at the moment, but a bump nonetheless and at virtually no cost).
2) they get the bitcoin spenders that they may not have otherwise (an admittedly small bump at the moment, but a bump nonetheless and at virtually no cost).
I hear from merchants who start taking bitcoin that after an initial spike they see almost no volume.
The above quote fits with my experience as well, though my sample size was a single merchant. I noticed they were accepting bitcoin, so I sent a congratulatory email and got a response along the lines of, "Surprisingly, no one at all has bought my product using bitcoin! Maybe that will change in the future..."
> Accepting bitcoin as payment isn't beneficial right now. There's no benefit for merchants, because it's instantly converted back to traditional currency.
I see another benefit. Merchants benefit from lower transaction fee vs credit card.
They have tabs that go "Credit card", "Paypal", "Bitcoin", so, presumably, 0 people will be confused by that, plus they have lower fees than either CC companies or Paypal, so it sounds like an obvious win for them.
With a large enough user base, you'll definitely encounter people that will be sufficiently intrigued by the idea of paying with Bitcoins they don't have (or confused by accidentally clicking on the Bitcoin tab) to get distracted and end up making the payment via one of the other hotel search website windows they have open. That's true even if the Bitcoin tab is much more discreet than the "credit/debit card" default.
There are, after all, enough people confused by a concept as non-novel as the address their credit card is registered to for some companies to be willing to pay higher interchange fees and accept higher chargeback risk to omit those fields from their CC forms.
I think this reasoning is mistaken. Yes, bitcoin-accepting vendors act as a new sink for supply, but for that reason they also increase the incentive to leave bitcoin sitting in your wallet, ready to spend on something you would like to buy (much as we keep money in our checking accounts so we can draw on them at will). In aggregate, if (big if) lots of people are using bitcoin as money, then speculative demand may decrease, but currency demand could increase dramatically.
I think it will happen when their suppliers accept Bitcoin as payment. The chain has to start somewhere, at the moment they have nowhere to spend them.
On the other hand merchants who choose to accept bitcoin using Coinbase (or Bitpay) and who also choose to keep some fraction of their profit in bitcoin (thereby exposing their profits to currency volatility, which may even be a good thing for growth of their profits) will tend to increase the market price of bitcoin.
Overall it seems like most merchants accepting bitcoin are not holding any of the bitcoins they accept. It would be great to see more merchants choosing to keep some fraction, however small, in bitcoin itself.