Topic: Hard for a business in bitcoin industry? (Read 1388 times)

You make an intriguing point. Yet are we talking about a brick and mortar business that deals in a local currency, an online business that has significant overhead through use of a local currency, or a completely digital business that has little overhead?

Part of the issue of leaving income from a sale in bitcoins is the opportunity cost loss of recapitalizing that income into more product to make an additional sale. I am assuming we are not discussing banks which speculate in the market with their money but rather an actual business that provides either product or service. Most businesses don't or cannot due to their articles of incorporation and operating agreements speculate in the market with profits. Now one could argue that keeping income in bitcoins is not speculating, simply holding the income in the currency of the transaction.

However, that argument doesn't hold up. It's a loophole argument. If I own a business that has investors based in the U.S., and my business is based in the U.S., and I speculate with income received on products sold by holding that income in a foreign currency where a sale was transacted, I am risking my investor money.

Now that risk may be allowed by investors to seek higher returns, however, I'm a business, not the investor, I want my investor return as low as possible as far as percentage of payment back. Higher risk is a bad thing. Currency fluctuation is thus a bad thing, so speculation is a bad thing.

The ONLY reason to even consider the use of Bitcoins for a business that is not in the business of currency speculation is to increase a customer base.

The ONLY argument one could even make to counter this issue of overhead is if the purchase of product sold can be reacquired utilizing Bitcoins as a currency and eliminating the need to convert to local currency to re acquire supplies/etc for selling more product.

If I sell a table for Bitcoins, but need US dollars to buy more lumber, leaving my income from the sale of a table in Bitcoins risks my ability to buy more lumber for more tables.

Okay okay, so you could argue to take out the money needed to buy the lumber and leave the rest that was the "profit" in Bitcoins to speculate in the Bitcoin market. But that would be illegal for most businesses (think separate entity not a person that can have an investment account) that do not specifically have it outlined in the operating agreements that they can speculate in foreign currencies. And really, that is what Bitcoin is, a foreign currency (aka not the local currency).

I would expect bitcoin businesses to find that when the price of a bitcoin is going up (or at least the expectation of it is), people should want to hold on to btc more to make a capital profit, then buy more for less. When the price is falling, people should want to release them sooner. The price has been going up somewhat of late.

pretendo, are you Ron Paul ?  (nice try in your sig

For a business residing in the United States, for example, which records all income in as taxable reported income, how could you properly report a sale of a product with a taxable income number if you don't peg bitcoins to the dollar to equate a value?

Consider this: Business sells product which has cost. Business receives bitcoins as payment. Cost is written as an expense on taxes. Bitcoins are converted to US dollars to cquire more product, pay salaries, etc.

I suppose one could argue that the income be only considered in terms of U.S. dollars upon exchanging the Bitcoins for dollars, but that could pose issues if done outside of the same fiscal year.

Or let me rephrase this: Assuming you were a business undergoing an audit or review of financial statements, you would need to have the value of Bitcoins in terms of ones own currency to properly conduct the audit unless you were calculating Bitcoins as not a monetary value but as an asset owned by the business. But then, that asset would need to have a value equated with it still.

My accounting and tax recording thoughts here could be flawed.

That and it just is *not* at all feasible to keep income in bitcoins actually IN bitcoins without serious risk regarding overhead due to fluctuations in exchange rates as previously mentioned.

Ideally that would be great.  Unfortunately, since Bitcoin's most compelling feature is as a facilitator of internet commerce, the Bitcoin economy is not made up of primary producers like farmers and miners (you know what I mean), but of merchants who have significant dollar-denominated costs.  Quoting prices in BTC helps the Bitcoin economy, but adds overhead and squeezes profit margins for individual businesses when the exchange rate fluctuates.

I would advise unpegging prices to USD and keep it purely in terms of BTC, especially as bitcoin is now starting to mature.

I have made quite a number of sales recently with bitcoins. I also am diversified although and take PP and all major Credit cards. I recently just got involved with bitcoin and started accepting it as an additional form of payment. The response from the community has been great. I plan on accepting it for the indefinite future now.

Not many buyers out there, any other bitcoin businesses struggling?

Im not struggling but ive noticed sales have dropped considerably.