Four years ago I tried to live on Bitcoin for a week and failed. It was too difficult to find companies that would accept it as a form of payment.
Bitcoin was trading in the $ 2,500 range at the time in 2017. Later that year, it hit a then all-time high of nearly $ 20,000. In 2018, it lost 80% of its value.
As bitcoin has climbed 2,220% since the days of $ 2,500 per coin – recently surpassing $ 58,000 – I decided to put it to the test again.
But before embarking on my new adventure, I thought about the things I was able to pay in bitcoin in 2017, and how much that amount of bitcoin would be worth at last month’s record prices.
How much i paid too much
At the time, I found a bitcoin holder in a chat room who agreed to meet me at Penn Station and sell me a New York City MetroCard in exchange for bitcoin. I ended up paying him $ 20 worth of bitcoin. If I had kept that $ 20 in bitcoin, it was now worth $ 464.
That $ 10 salad that I paid in bitcoin at a French restaurant on the Lower East Side four years ago would now be worth around $ 232.
Melt’s ice cream sandwich? It cost me $ 6.50 worth of bitcoin in 2017. That amount of bitcoin would be worth around $ 150 at the February high.
But that was then, and it is now.
I reduced my recent experience to just a few days due to health risks during Covid, the city’s virus restrictions, and the closure of a number of restaurants due to the pandemic.
Apps make it easier now
In 2017, I struggled to buy coffee directly using Bitcoin. In 2021, this is possible thanks to Bakkt Cash, a digital currency platform that Starbucks is testing through a limited program.
This is probably one of the biggest changes in four years, a growing number of third-party apps making it easier to spend your bitcoin. Instead of putting a credit card in the apps, you choose to pay with Bitcoin. Typically, apps show you the prices in dollars and use your bitcoin as the source of payment.
Flexa, which bills itself as the “most fraud-resistant payment network,” said retailers such as Nordstrom, GameStop and Lowe’s allow consumers to transact with Bitcoin using its system.
However, Flexa told CNBC that the majority of transactions on its platform, over 60%, were in coffee, tea and other quick-service items. It does not charge any user fees.
Like four years ago, there are workarounds, including gift cards that bitcoin holders can purchase using their bitcoin. However, these sites usually have transaction fees which vary depending on a number of factors. Currently on bitinfocharts.com, the average transaction fee is $ 15. Two weeks ago it was around $ 30.
Expensive transaction fees are one of the many reasons Bitcoin holders have told CNBC that they don’t see it as real currency. According to a report by Chainalysis, only 8% of Bitcoin transactions in the United States were for merchant services last year.
Using a popular service, I was able to purchase a $ 5 gift card to use on Amazon by connecting my crypto wallet. The process was taking a bit of time and the transaction page did not show the service charges.
What could redefine the way cryptocurrency enthusiasts view bitcoin is PayPal’s success in deploying supportive technology that would allow its customers to use bitcoin as a payment tool with its relatives. of 30 million merchants.
“PayPal’s involvement should make it much easier for merchants to accept bitcoin, especially since what PayPal is doing is basically enabling synthetic acceptance of cryptocurrency. Ultimately, merchants will have fiat currency in their books for their products and services, ”Mark Palmer, general manager of financial technology and digital assets at BTIG, told CNBC.
David Grider, director of digital asset strategy at Fundstrat, said a decrease in bitcoin volatility, lower crypto-fiat exchange fees, and wider use of crypto in general are needed before the cryptocurrency payments are only adopted by the general public.
Until then, most experts have said that bitcoin will be widely viewed by holders as a store of value compared to a currency. It is often called digital gold.
Regulations and taxes
However, before you start preparing your phone with apps that allow you to use your bitcoin, beware of two things: regulations and taxes.
Last week, Treasury Secretary Janet Yellen sounded the alarm over the use of cryptocurrencies in illicit activities as a “growing problem”, raising concerns over whether digital coins, which by nature are decentralized, would be regulated in one way or another.
Regarding the issue of taxes in the run-up to April 15, investors should be aware that the IRS classifies bitcoin as property, not currency. So yes, capital gains taxes could apply.
Only time will tell if I’ll kick myself in four years to buy items with Bitcoin or thank my lucky stars. It all depends on whether the sky-high prices go even higher.
– CNBC’s George Manessis contributed to this report.