2

How do retail outlets manage the massive price instability?

Are they really repricing every second with 25-50% spikes and drops over 24 hours?

How much does it cost to maintain accurate prices? Most stores I go to have printed prices.

Please only reply with actual accounts of price instability management by sellers.

2

This isn't an account, but it covers anything an account could.

They update their prices based on how many USD they want for the item and the current BTC/USD ratio. There's even an electronic price tag that does this automatically: http://www.bbc.com/news/technology-26031331.

Online, it's usually handled by some outside payment process company like Coinbase. You set up the website to communicate to Coinbase "I need $x for this guy's order" then they redirect the user to Coinbase's payment page, where Coinbase asks the user for $x worth of BTC at the current price. When Coinbase gets the user's coins, you (the merchant) gets your money. Most merchants never touch the BTC.

In person, without the electronic price tags, it would be impractical (or even impossible) to price items in bitcoin by hand. One way around this would be to price them in USD, then take their total at the register to determine the amount of BTC needed for the purchase. Ie, the customer comes to the register with $x worth of goods, the merchant looks up the price of BTC (which they could do quickly), then asks the customer for $x worth of BTC.

If you mean how do they manage the risks of holding an asset that is volatile, the answer is that they don't hold it. They use Coinbase or similar.

  • 2
    This instability isn't an inherent feature of cryptocurrencies. If it were used at the same scale that USD/Euros are today, I'd expect it would be highly stable, just like those fiat currencies. I believe the instability is, ultimately, temporary. – Tim S. Apr 22 '14 at 18:53
  • @Gracchus Gold is not used as our everyday currency, and hasn't been since the USD became fiat. I think cryptocurrencies have the potential to become everyday currency (e.g. your "prices listed in a store" example), and in that situation, I believe they would be stable. – Tim S. Apr 22 '14 at 22:08
  • The universal demand for a currency is what gives it its stability. Gold isn't stable because it isn't a currency anymore. At best, it's a store of value. You have to ask yourself why people buy gold. It's all investors who are trying to avoid the crash of some fiat (gold bugs), investors trying to ride the bubble created by the gold bugs, and people looking for a good store of value. (The former 2 being the reason for instability. BTC has the same problems now with the former 2, but once it's universal, there won't be anymore instability caused by them. – Tyler Apr 23 '14 at 2:37
  • Another way to explain it is with market depth. Right now on BTC-E, you could raise the price by 1.5% by buying an insignificant $100k worth of BTC (at $6b market cap). I couldn't find any data on the market depth of a big stock or something similar, but it would require at least 1 or 2 orders of magnitude more to move a NYSE stock that much. Now, imagine 10% of the people in the world used bitcoin and it had a total of say $10t invested in it. How much do you think would have to be bought or sold of something with $10t invested in it to move the price 1%? A LOT more than $100k. – Tyler Apr 23 '14 at 2:51
  • Unless you only print currency for which you already have gold. A currency doesn't necessarily have to be arbitrarily inflated. – Tyler May 13 '14 at 1:49

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy