Bitcoin Is Hot Until You Actually Try to Spend Some
(Bloomberg Gadfly) -- Bitcoin seems to be everywhere these days. Finding a place to spend it is another matter entirely.
That flies in the face of popular perception that businesses are trumpeting the acceptance of the digital currency as a form of payment. Looking for a mate? OkCupid stopped accepting cryptopayments a year ago. Booking a flight? Expedia.com and Virgin Atlantic both dabbled in bitcoin but now don't accept it for airfare. A Holiday Inn in Brooklyn no longer books beds for bitcoins.
Nor can you raise a pint at north London pub Pembury Tavern, which received some press a few years ago for entering the digital currency economy, but has since, like others, quietly exited.
And chowing down with bitcoin is getting complicated. The website airbitz.com lists just three restaurants in Manhattan where diners can pay with bitcoin. Two have closed. A third, Melt Bakery, which sells only ice cream sandwiches, accepts bitcoin, but the last time it did was July 2. And while the website of Piccola Venezia, an upscale Italian restaurant in Astoria, Queens, says "bitcoin accepted here," I wouldn't make the trek. The person who answered the phone there said bitcoins were not welcome. "It's a big mistake."
It does looks as if pizza lovers can get Domino's delivered in Brooklyn with bitcoin through a website called Pizzaforcoins.com, but it will cost them. A large pie with one topping (and the website forces you to get at least one topping -- I went with extra cheese) was 0.0036 bitcoin when I checked on Thursday, which translated to $34.12 before tip. It normally costs $8.70.
None of this is likely to rattle investors who are rushing into bitcoin. Its use as a medium of exchange has become entirely beside the point. Most of what has been propelling the cryptocurrency's remarkable rise recently has been, like in any bubble, the fact that the price has been climbing rapidly. The rise justifies the rise. And many bitcoin investors now view bitcoin more akin to gold than say dollars or any other traditional currency.
But at least part of what underpinned bitcoin's more than 900 percent jump this year, at least initially, was the idea that bitcoin's acceptance, and use, was spreading more widely. A key aspect of bitcoin is that it is a cheap way to complete transactions without the middleman. Earlier this year, bitcoin investor and author Chris Burniske gave a presentation about the network value-to-transaction ratio, which compares the value of all bitcoins to transactions being done in the currency. Some have dubbed the ratio "bitcoin's P/E" and used it to argue against a bubble.
The idea, though, that bitcoin is being rapidly adopted, or even just gradually, is a myth. In 2013, a number of retailers and companies, large and small, started accepting bitcoin. Four years later, shoppers can't use it at any large physical retailer. What's more, not only have Walmart and The Gap not adopted bitcoin, many of the places that said they would no longer do.
A long list of merchants that take bitcoin has circulated the Internet for the past few years, published most recently on 99bitcoins.com. But the list is mostly bogus. Many of the businesses on the list no longer take bitcoin or never did. There is a bitcoin payment button for online electronics retailer Newegg.com, but when I tried to use it for a Nintendo Switch, it didn't work. Even Bloomberg is on the list, but my colleagues in billing say you can't pay your terminal fee in bitcoin. Nor can you get a subscription to BusinessWeek or any of Bloomberg's other publications or services. On Thursday, Mike Bloomberg threw some cold water on the idea that bitcoins would be used widely anytime soon.
You can, in a roundabout way, use bitcoin to buy groceries at Whole Foods, but only after buying a gift card from eGifter, which is really no different from having to convert bitcoins back into cash before using them. And a number of web reviews of eGifter suggest the process is not painless or quick. An eGifter spokersperson said customers can use bitcoin, but the transaction is "slightly more complicated" than using cash.
Even so, a number of sites that track bitcoin, like Blockchain.info, show that use is up. On average, the daily value of bitcoin transactions has risen just more than 400 percent this year compared with the first 11 months of last year, according to Blockchain.info. But given the fact the number of places accepting it is falling, that seems hard to believe. The number is supposed to track just the volume of bitcoins used to buy actual goods or services. Even bitcoin believer Burniske thinks the figure has likely been inflated by all the people who have rushed into bitcoin as an investment. Worse, the cost to complete those transactions is rising even faster, with fees charged up nearly 2,200 percent this year, although it's still minuscule on an absolute level, a fee of just 0.05 percent of the average transaction this year.
Again, none of this will likely pierce the frenzy around bitcoin. Who in their right mind would spend the stuff now anyway, even if they could?
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Stephen Gandel is a Bloomberg Gadfly columnist covering equity markets. He was previously a deputy digital editor for Fortune and an economics blogger at Time. He has also covered finance and the housing market.
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