Bitcoin has experienced various price fluctuations since its inception, rising from around $100 to over $1,100 per coin over the course of 2013, falling almost to $200 by the end of 2014, rising back to around $450 by 2015’s close, and is currently valued close to $400, with minor fluctuations continuing daily. Price uncertainty such as this poses a particular challenge to businesses depending on a reliable stream of income to operate.
However, despite these major fluctuations in the price of Bitcoin, the total number of transactions has steadily been rising. Merchant service BitPay charted their transaction volume against the price of Bitcoin, and found their transactions were also steadily increasing regardless of price fluctuations.
Cointelegraph spoke to several business owners who accept Bitcoin, as well as a BitPay representative, about the effects of price fluctuations on business.
Price surges encouraging business to adopt Bitcoin
According to Ian Underwood, owner of firearms manufacturer Shaolin Rifleworks (which uses Airbitz for transactions), their decision to accept Bitcoin can be traced to a price surge causing many potential customers to have disposable funds in cryptocurrency.
“We decided to accept it because we make an expensive product, and there are people who have a lot of money available in Bitcoin, but not in cash.”
Dealing with price fluctuations
Adam VanLandingham, owner of construction company Auburn Contracting Services, LLC, does not have any business expenses payable in Bitcoin, however he says that price fluctuations are not a problem.
“Using Bitpay it is not an issue because it transfers directly into [U.S. dollars] and deposits into our account. We do retain 10% savings, however it's not much.”
Attorney Brandon Ross, who also uses BitPay to convert directly into local currency, does have the option to use Bitcoin to pay certain expenses:
“There are a few occasions where I've had an opportunity to pay directly with Bitcoin for a few vendors, typically technology purchases.”
Having insulated his business from feeling the effects of fluctuations directly, Ross is not intimidated by changes in price long-term.
“I don't worry about the price fluctuations all that much. Some people are obsessed with them. But digital currency is in its infancy still. There's going to be fluctuation caused by several different factors. As the technology matures and if it receives wider adoption, it might even out.”
Trusting cryptocurrency as a payment method
VanLandingham was first turned on to the idea of using Bitcoin after seeing it featured on a business television program.
“I had seen a report on [TV program hosted by John] Stossel in 2010. I bought my first bitcoin for $29”
For Ross, it took more exposure to feel comfortable with using Bitcoin for his business.
“I had several clients who were working with it. I knew about it long before I started using, but I really didn't "trust" it. I once had someone offer to pay on a $100 bill when Bitcoin was still like a quarter per. I declined. I regret that.”
Price changes affecting customer choices
The tendency of Ross’ clients to use Bitcoin changes depending on the price at that time.
“When the price of BTC drops, people prefer to pay in USD. But that makes perfect economic sense-- based upon the payor's personal expectations… when prices fluctuate, I certainly understand why people might spend less BTC. If they think BTC has a good future.”
According to BitPay representative James Walpole, there has been reliable demand from some businesses to retain a portion of their income in cryptocurrency.
“Approximately 40% of BitPay merchants keep some or all of their settlement payouts in Bitcoin. That 40% has been pretty constant over time.”
Walpole concurs with Ross’s observation of Bitcoin being used more in times of high prices and being sought more in times when the price is relatively low.
“Regarding settlement preferences in times of price fluctuation: We do see some merchants accumulating more bitcoin payouts (as opposed to local currency payouts) in times when the Bitcoin price has fallen.”