Bitcoin, Still Not a Currency. And Now Crashing.

(Bloomberg) Last month, I wrote a post titled “Sorry, Bitcoin Isn’t a ‘Currency’” pointing out that whatever the merits of Bitcoin as an investment, its use as an actual currency useful for buying and selling was minimal. I wrote it thinking that I was largely reminding folks of an obvious point. Apparently not. The post elicited more than 200 comments. Maybe there were two or three people who agreed with me in there; I might have missed them.

By and large, the comments insisted that actually there were plenty of people doing real business using Bitcoins. They pointed me toward retailers like Bitcoinstore.com, a retailer of electronics and other goods that did more than $500,000 of business in March. So far this month, Bitcoinstore, according to its website, has sold $142,250 worth of products. Good for them: hats off to anyone willing to experiment with new business models.

What really matters though is that it’s a tiny fraction even of the $42.7 million in Bitcoin trades conducted in just the last 24 hours at the biggest Bitcoin exchange. There are folks who make purchases with Bitcoin (one commenter claims he now buys all his pizza with bitcoin; yes, it can be done, but it’s faster and cheaper to call Domino’s directly). In the main, though, the folks making purchases with Bitcoin seem to be those using it as an investment.

Listen to Tony Gallippi, the chief executive and co-founder of BitPay, a Bitcoin payment processor. Bitpay last month processed $5.2 million worth of Bitcoin purchases. He contacted me, through his PR folks, after my earlier post and kindly volunteered to walk me through the Bitcoin transaction process. Merchants who use Bitpay generally set prices in dollars or euros. Bitpay then converts that to a price in Bitcoins.

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