A focus on what really makes up the bitcoin ecosystem – transactions – was discussed in a panel on Wednesday, 26th March, as part of the final session of CoinSummit San Francisco.
Everyone loves to predict that the price of bitcoin will rise, but the more important question may be, ‘Is an expensive bitcoin actually good for the BTC economy?’
No one can deny that the level of exposure bitcoin has received in the past year has had a lot to do with its price. One year ago, the highest traded price of one BTC on Mt. Gox was $86. Today, there is no Mt. Gox, and bitcoin is now trading in the $500 range on a more diversified set of exchanges.
So, does a high valuation bode well for bitcoin as a transactional store of value?
Vinny Lingham, CEO of Gyft, a mobile gift card platform that accepts BTC, and Tom Longson, CEO of GogoCoin, a maker of prepaid bitcoin cards, weighed in at CoinSummit on 26th March.
The upward pricing pressure on bitcoin means that as the price goes up, investors will cash out to realize a fiat return, causing a selloff market the drives the value down. That can create volatility in the bitcoin markets over time.
Both Gyft and GogoCoin’s businesses are similar – they are a tangible retail way for consumers to experience bitcoin. However, both of these companies are impacted by bitcoin price swings.
“When I talk to people [about bitcoin] volatility is one of their primary concerns.”
Lingham echoed these concerns, saying:
“I just want it to be a smoother ride than what we have had in the past two years.”
Both Lingham and Longson also agreed that retail businesses like their own offer a way to solve some of these issues, if not reducing volatility, at least improving consumer trust.
Lingham believes getting bitcoin to the point of sale is what will increase the transactional value of BTC:
“I think merchant adoption is going to far outpace consumer adoption.”
The $10,000 bitcoin
Lingham took an informal survey of hands from the audiences about bitcoin’s future price prospects, and there wasn’t much doubt that bitcoin would surpass $2,000 soon:
“The broad consensus is that bitcoin will be over $2,000 within two years. I’m kind of fearful if bitcoin hits over $10,000 this year.”
Many believe that the $10,000 bitcoin will come in 2014.
The problem that Lingham sees is that to the consumer, bitcoin looks like a wild ride. Most people require a form of payment that is stable and secure:
“If you ask what consumers are looking for, they want something that stands behind it [bitcoin].”
Getting banks on board will be a huge deal for bitcoin. It starts with financial companies in the US banking bitcoin businesses, which is still a struggle for many of them today. “A bank that would accept bitcoin businesses, that would be a big deal,” said Longson.
He added: “The US is being quite permissive when it comes to bitcoin. I don’t think we’re not that far away.”
The question is: if banks start working with bitcoin, will the price skyrocket? Will that limit the use of bitcoin as a transactional currency and make it more like a commodity?
Lingham already thinks that’s the case:
“I don’t think bitcoin is a currency. It’s a commodity,” he said.
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