Quote from: Nath on June 13, 2011, 02:31:12 PM

The core idea of (modern) fiat currencies is to provide a stable exchange media which is required for every stable economy. This is done by having an independent organization which controls the amount of circulating money to stabilize it. While it's still possible to speculate with fiat currencies, it's less profitable because of the artificial stabilization through a central bank which often goes against the market. As the result the currency is much more stable which makes trading etc much more predictable if done with a fiat currency. Which in turn leads to economic growth.

With Bitcoin we see what happens if currencies are subject to heavy speculation: The value is changing rapidly, and this makes trading and any kind of accumulation (which is necessary if someone plans bigger investments) with the currency very risky. And this will probably prevent the use of Bitcoin for it's primary use: Trading. People want to trade and people want to speculate. But only very rarely they want to do both at the same time with the same thing. If you have to take currency fluctuations into account to find the right time to buy things, this isn't what most people are willing to accept. As a result they will probably stay at some fiat currency for trading and use Bitcoin for speculative purposes only - which may kill Bitcoin in the end.

Any idea how to overcome this problem?

I recently started to accept Bitcoin as a merchant, and it was the same day BTC went from 18 to 31 and then dropped off pretty low against the USD due to heavy sales. Wink

So what I did was making the order processing partially automatic; the customer select Bitcoin during checkout in the online shop and gets information how to proceed in the order confirmation email automatically. When we receive an order I browse through the recent currency trade stats/graphs for the past days and reply with an offer via email which is time limited depending on how big the BTC currency fluctuations are against US Dollar. This is also a good way to get experience with BTC, and maybe at a later stage implement fully automatic handling.

In addition to this, in a way to even out the BTC currency losses when customer "gets too good rate", we keep some of the customer payment in BTC (eg. like 50%), and exchange the rest to USD. Since I believe the Bitcoin will increase in value against the USD eventually, even if it takes a month of swinging up and down, half of the customer payment will then increase enough to cover any losses we had at the time of purchase.

To survive as a merchant these days you have to improvise and adapt, this is nothing new for us. I think the people worried mostly about currency fluctuations are miners here in the forum, funny that they seem so concerned about merchants. My advice; when the the rate drops down, stick with your Bitcoins, don't panic. Hasty decisions are rarely good.