On the backs of the recent PayPal and Square announcements, I thought I would share my thoughts on merchant adoption.



What impact on price does merchant adoption have?

There’s been a tremendous amount of chatter recently about how merchant adoption has contributed to the price declines for Bitcoin. Some of the most well known voices in the community have said just as much. The simple explanation goes that spending Bitcoins at an online merchant who then immediately converts Bitcoin for fiat results in a wave of selling pressure which is not met by new demand - leading to price declines.



However, the truth is that merchant adoption can only be positive for the price assuming consumers are rational. Have they been rational? I’m not so sure. Below I break down the good and the awful reasons to spend Bitcoin for a consumer.



It’s a good idea to spend Bitcoin when:



1. You believe the price of Bitcoin will fall and you would prefer to receive a product or service in return rather than take back cash via an online or local exchange.

2. You are being incentivised to spend Bitcoin via a discount offered by a merchant

3. You do not have cash to spend or a credit card to use

4. You desire a product or service that is only offered in Bitcoin

5. You need to use Bitcoin for legal/security/discreet reasons



It’s an awful idea to spend Bitcoin when:



1. You hear of a new company accepting Bitcoin



2. You continually support businesses that accept Bitcoin even if they are offering an inferior product or service which absent their Bitcoin acceptance would not / did not have your business

3. You want to show how much demand there is and how big the Bitcoin community is to a merchant



4. You think the Bitcoin price is going up

The Rub



Too many merchants are receiving Bitcoin purchases from consumers who should not have used Bitcoin in the first place. This is understandable as the community initially got very excited and proud of the merchant adoption news. However, most merchants who have accepted Bitcoin have really given consumers no good reason to spend Bitcoins there. As time goes on, holders of Bitcoin will realise it is the PayPals, the Square, the Expedias of the world that need Bitcoin.



We are crossing that chasm now.



Assume the current stalemate continues where mainstream Bitcoin consumers have little reason to spend at mainstream merchants who merely offer Bitcoin as a payment option.



One of two things will happen:



1. Companies reverse their stance and stops accepting Bitcoin



or



2. Companies increase incentives to pay with Bitcoin



The sooner the Bitcoin community stops spending Bitcoin unnecessarily for various vanity reasons, the sooner companies will have to make that choice.



The choice they’ll make is as clear as day.









