The price of bitcoin has been falling. But the amount of money I’ve been saving by using bitcoin is only going up. How is this? And how can you save money by ignoring the downward price of bitcoin.
Why is bitcoin’s price falling? Why will it continue to fall? People cite 3 reasons for the decline of bitcoin price:
- Most merchants who accept bitcoin are not holding bitcoin, they sell it instantly. This creates downwards pressure.
- Bitcoin miners have to pay electric bills in fiat. They sell bitcoin to cover their costs, introducing even more downwards pressure.
- The price of bitcoin should never have been as high as it is to begin with because a) Some bot at mtgox set the stage for a bubble b) there are no instruments for shorting bitcoin so the price is artificially high. In other words, this is a totally logical correction.
So why does bitcoin’s price not matter? It’s going down, so what? This only means that you will lose money if you hodl bitcoin. It does not mean that you will lose money if you use bitcoin for transactions. Let’s explore 2 things. 1) how to save money with bitcoin without being impacted by the price declines and 2) how this simple trick will help stabilize bitcoin in the long run.
First how to save with bitcoin in the down market:
When merchants accept bitcoin they are saving money over the cost of accepting credit cards (and from the real risk of chargebacks). Some merchants are passing those savings on to the customer. Such forward-looking merchants deserve be rewarded with our business. I can cite gyft, or overstock as an example because they both give you credits when you buy with bitcoin. There are many more. You can buy bitcoin just seconds before using it to buy at a discount. I use coinbase, I place an order and I get bitcoin within seconds, then I spend it within seconds. I hear that when Circle comes out it will allow the same process. So effectively, you can save a small percentage on your purchase if you click 2 buttons on coinbase or circle before clicking “buy” on an online purchase. This is the “killer app” of bitcoin: that 15 seconds of clicking could save you 3% on online purchases.
The killer app of bitcoin:
- Find an item you want to buy, from a merchang that offers a discount on bitcoin purchases.
- Go to coinbase, or circle, or other, buy the correct amount of bitcoin and instantly use that newly purchased bitcoin to buy from the merchant
It’s easy (once you set up instant-buy), it’s fast (15 seconds or so), it consistently saves you money, and it doesn’t matter what the price is and whether it’s going down.
Second, why it’s good:
Some high-risk technology angel investors see bitcoin as having huge potential. Risk-averse investors see bitcoin as too volatile (big upswings are just as risky as big downswings) and they do not see bitcoin moving any of the needles they care about… yet. Most investors are risk averse. Hedge funds are about managing risk; about getting as much opportunity with as little downside. The “needle” that they care about most is transaction volume. The good news is this: a higher transaction volume will smooth over the volatility. Yes, that’s right, the more transactions we all make with bitcoin the less aggressive the price swings will be. The lower the volatility the less of a turnoff bitcoin is to most investors. The higher the transaction volume the more attractive bitcoin becomes to investors. And what was I just talking about? About increasing transaction volume by buying more stuff with bitcoin through the “killer app of bitcoin”, e.g. get savings by buying with bitcoin that you just purchased seconds before.
Call to action
Do your part to support bitcoins future. Stop looking at the price. Stop hodling. Switch your spending to bitcoin and ignore the price because it’s irrelevant if you use instant-buy features on coinbase and circle. If you eat food (most of us do) then buy it with a bitcoin that you just bought seconds before. If you wear clothes (most of us do) then buy them with bitcoin that you bought seconds before. If you have friends (most of us do) buy their birthday/nameday/baby-shower/wedding/etc. gifts using bitcoin that you had bought seconds before. etc. etc.
Stop looking at the price of bitcoin. Start looking at the savings which bitcoin wil get you.
You can save money by buying with bitcoin. You can avoid the downward slide of bitcoin’s price using instant buy on coinbase and circle seconds before checking out from the merchant. Doing so increases the transaction volume of bitcoin which will smooth out volatility and make bitcoin more appealing to investors. So do your part, buy with bitcoin and stop looking at price.