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If you believe that overstock will lead to increased demand for BTC (perhaps not due solely to overstock but a wave of merchants who follow suit) and that the d

If you believe that overstock will lead to increased demand for BTC (perhaps not due solely to overstock but a wave of merchants who follow suit) and that the demand outpaces BTC's inflation (i.e. the ~3600BTC mined into existence each day), then BTC's value will rise as a consequence.

minimax 13y ago
The Overstock case doesn't increase net demand for bitcoins. This is how Overstock works. I have dollars and I want to buy something on Overstock. I buy some bitcoins with my dollars. I send bitcoins to Overstock and Overstock sends me the product. Overstock then sells the bitcoins to convert back to dollars. So there is a buy and a sell for each transaction which creates no net demand for bitcoins. And if you consider the alternative where I already have bitcoins because I mined them, then I have bitcoins and I send them to Overstock who sells them for dollars. In that case you actually create downward pressure on the bitcoin price (against the dollar) since there is no buy on my part to net against Overstock's sale of bitcoins.
- a3_nm 13y ago
  This is the initial setup, but as there is some cost involved when converting bitcoins to USD and back that is degressive with volume, if many people are buying through bitcoins, it would start making sense for Overstock to hold the bitcoins for a while and convert them in bulk, so this could eventually increase the demand for bitcoin after all, no? (Of course, given the current volatility and volumes, it would make no sense for Overstock to do this yet.)
- nofi3939 13y ago
  It's true that the Overstock transaction itself doesn't create new demand. But it may bring new users who buy/hold BTC, if they see it as a useful store of value or just for convenience sake to make future purchases. Overstock's CEO said they may start holding it for longer if they can pay their vendors in BTC or have derivatives that allow them to hedge against decline in value. Also, because the exchanges charge a fee to convert to/from fiat (e.g. 1% in coinbase's case), that creates some incentive to stay as BTC.
- natrius 13y ago
  Coinbase allows retailers to specify how much Bitcoin to hold from purchases instead of converting to dollars. As more merchant expenses can be paid with Bitcoin, merchants will begin to hold larger amounts to avoid the 1% hit. As a result, they'll enjoy near zero transaction fees instead of 2-3%.

minimax 13y ago

The Overstock case doesn't increase net demand for bitcoins. This is how Overstock works. I have dollars and I want to buy something on Overstock. I buy some bitcoins with my dollars. I send bitcoins to Overstock and Overstock sends me the product. Overstock then sells the bitcoins to convert back to dollars. So there is a buy and a sell for each transaction which creates no net demand for bitcoins. And if you consider the alternative where I already have bitcoins because I mined them, then I have bitcoins and I send them to Overstock who sells them for dollars. In that case you actually create downward pressure on the bitcoin price (against the dollar) since there is no buy on my part to net against Overstock's sale of bitcoins.

a3_nm 13y ago
This is the initial setup, but as there is some cost involved when converting bitcoins to USD and back that is degressive with volume, if many people are buying through bitcoins, it would start making sense for Overstock to hold the bitcoins for a while and convert them in bulk, so this could eventually increase the demand for bitcoin after all, no? (Of course, given the current volatility and volumes, it would make no sense for Overstock to do this yet.)
nofi3939 13y ago
It's true that the Overstock transaction itself doesn't create new demand. But it may bring new users who buy/hold BTC, if they see it as a useful store of value or just for convenience sake to make future purchases. Overstock's CEO said they may start holding it for longer if they can pay their vendors in BTC or have derivatives that allow them to hedge against decline in value. Also, because the exchanges charge a fee to convert to/from fiat (e.g. 1% in coinbase's case), that creates some incentive to stay as BTC.
natrius 13y ago
Coinbase allows retailers to specify how much Bitcoin to hold from purchases instead of converting to dollars. As more merchant expenses can be paid with Bitcoin, merchants will begin to hold larger amounts to avoid the 1% hit. As a result, they'll enjoy near zero transaction fees instead of 2-3%.