Why Retailers Like Expedia and Overstock Are Getting On Board With Bitcoin

The cryptocurrency is now more accepted but still has drawbacks

5 October 2017

There are many unknowns about Bitcoin cryptocurrency, the electronic money in which transactions are made on a blockchain, an encrypted public ledger. The value of a bitcoin, like any cryptocurrency, is volatile and can increase or decrease dramatically within hours—which raises the question of why anyone would accept it as payment. Yet thousands of businesses do.

Those accepting the cryptocurrency include the travel website Expedia, shopping site Overstock, and the dating app OkCupid. A building developer in Dubai announced in September that people who purchase its apartment units can pay in bitcoins.

To better understand the growing acceptance of the cryptocurrency, The Institute interviewed Kevin Sweeney, a professor of finance with the Foisie Business School at the Worcester Polytechnic Institute, in Massachusetts. He is the founder of Sweeney Strategy Consulting, a company in Springfield, Mass., that advises organizations on financial operations and trends.


One incentive for retailers to accept Bitcoin is because the system is borderless. They can receive any amount from anywhere in the world and from any computer or mobile device. Also, the fees on each transaction are lower than those charged by credit-card companies: 1 percent on total profits, compared with the 3 percent processing fee credit cards charge.

Other companies are accepting Bitcoin because they can’t get a bank account, and holding onto cash is too dangerous—such as distilleries legally selling marijuana in several U.S. states. Because the U.S. federal government bans the sale of cannabis, businesses cannot deposit their money at banks, which are subject to federal regulation. That leaves the distilleries with two options: store large amounts of cash or turn to a cryptocurrency.

“Keeping all your working capital in Bitcoin, however, is risky from a cash-flow perspective,” Sweeney says. That’s because the changing value of Bitcoin is not too dissimilar from stocks in that a stock’s value often fluctuates. “You can make an incredible amount of money by investing in a cryptocurrency, but you could also deplete your available operating cash reserves by a substantial percentage overnight,” Sweeney says.

Companies also have to be careful when keeping records of Bitcoin transactions. It is hypothetically possible to hide transactions, because Bitcoin payments are made on the blockchain, a decentralized system not regulated by any bank or government. But failure to report those transactions for tax or other purposes might violate the law in the United States and in many other jurisdictions.


Although most merchants immediately convert bitcoins to local currency, others are choosing to hold onto them in hopes their value will grow. That strategy comes with its own risks but also the potential for great rewards, according to Sweeney.

The most famous example is a developer who in the infancy of the cryptocurrency bought two pizzas for 10,000 bitcoins on 22 May 2010, worth about US $25. These days, that amount of bitcoins is worth more than $20 million. That date is now called Bitcoin Pizza Day. But then again, those bitcoins’ value also could have been zero by now.

Overstock announced in August it would be holding on to half of all Bitcoin payments as an investment, up from the 10 percent it held previously. The company currently accepts about $50,000 in Bitcoin payments each week, according to a CoinDesk article. It’s a risk that the online retailer can afford, Sweeney says: “Even if the currency diminishes in value, because of its size, the company can afford to take a hit of a couple million dollars without impacting its core operations.”

Retailers holding onto the currency as an investment might have to pay capital gains or equivalent taxes on any profits from the sale of the investment, just as those who invest in stocks and real estate do, he adds. For example, if a coffee table is sold for $100 worth of Bitcoin, but later the value of that Bitcoin payment increases to $1,000 when the cryptocurrency is sold, the retailer might need to pay tax on the additional $900.


Bitcoin hasn’t yet become a universally popular form of payment, Sweeney notes. One reason is because many consumers don’t perceive it to be a currency like cash, but more of an investment option. “When it comes to currency, consumers want the security of knowing their $100 is not going to be worth $50 in buying power tomorrow,” Sweeney says. “But those holding onto Bitcoin as an investment should expect that the inherent volatility is necessary to generate risk-appropriate returns.”

Until Bitcoin becomes as stable a currency as cash, most consumers are not likely to use it to make purchases, he predicts.

For now, it’s difficult to cite how much one bitcoin is worth. Last month it reached a peak of nearly $5,000 before dropping to about $3,800 a week later.

Moreover, setting up an account to purchase and store bitcoins requires technical savvy. It can be complicated for everyday consumers.

“If I want to shop on Overstock, it is much simpler to use my credit card or PayPal account,” Sweeney says. “Until it becomes easier, I have not necessarily been incentivized to pay with Bitcoin.”

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