Have you ever wondered if the price of bitcoins affects bitcoin business? Could this be a reason for businesses not to accept a volatile currency? Do sales plunge when the price drops?
I started doing a little investigating into whether it does or it doesn’t, and I was somewhat surprised by the answer.
Transaction volumes have stayed in the $50 million dollar range over the summer for the most. However, it is hard to tell if the transaction volumes are just people moving bitcoins from one wallet to another or if those transactions represent the exchange of goods or services.
Some businesses may suffer from price fluctuations more than others, mainly mining services. Miners make more money if the price is higher, so it makes sense that mining companies would see a decline in sales if bitcoin’s price dropped.
In my case, I use fiverr.com all the time. It’s great; I get transcription services done for articles, logo designs for my startup, even video editing. I do think about the price in the back of my head, but I figure it’s only five bucks. Plus, I prefer to use bitcoin rather than searching for a credit card and typing in a bunch of numbers. You never know if your computer is corrupted with a keyboard logger or if any company is going to have its data breached.
But that’s only five dollars, a trivial amount. What’s the psychology of consumers spending more? I asked the CEO of Bloomnation, an ecommerce platform for local florists, for his insight on consumer spending and price volatility.
“We have not seen much correlation between the price of bitcoin and the usage of bitcoin. Although price fluctuations cause some people to react, we fundamentally believe in bitcoin and its existence and have made no changes to strategy with bitcoin. Regardless of the price, we feel that this cryptic currency is a great solution for a global currency.” – Co-Founder and CEO of BloomNation, Farbod Shoraka
Customers using bitcoin aren’t that worried about price, because they are often encouraged by promotions. In fact, Bloomnation’s bitcoin users tend to spend 50% more on their purchases. Newegg was offering $100 off when you spent $350 or more with bitcoin, which caused a lot of people to spend their bitcoins.
I wanted to get a better perspective of the market at large rather than just one business, so I asked BitPay’s VP of Marketing, Stephanie Wargo, about price fluctuations and their transaction volumes.
She started off by mentioning that BitPay is “still doing well over a million dollars in transaction volume” a day. This is also due to the fact that BitPay has continued adding merchants.
“As more merchants come on board there’s more options. You get into that everything that you need everyday, the things that you buy online all of the time. Now you’ll be able to pay in bitcoin for those things. That’s just going to continue to keep transactions up and eventually turn into the price continuing to go up,” Wargo continued.
Now that it is past Labor Day, the financial markets are picking up; bitcoin will see new interest spurred by the investment community and new merchants accepting the currency.
“A lot of merchants have been working through the process now, in preparation of announcing that September-October timeframe to capitalize on the November-December spending season,” said Wargo.
Many in the community have noted that merchants converting their bitcoins to fiat and miners who sell their bitcoins have pushed the price downward. But, Wargo doesn’t think this will push down the price during the fall. More merchants are holding on to portions of their bitcoin using a 90/10 or 80/20 fiat to bitcoin rule and the acceptance by new major retailers will further legitimize the digital currency and take the price closer to the moon.
All-in-all, bitcoin transaction volumes in exchange for products will pick up no matter no what the price. Many merchants have been passing down their savings in the form of promotions. As bitcoin becomes just as easy to spend as other payment forms with payment processors and bitcoin debit cards, it will be used just as often.
Anyways, “it should be a very fun fall,” Wargo concluded.
