Why are the prices of goods sold using cryptocurrencies always denominated in Fiat?
90% of the time the general consensus in the crypto community is that we are “going to the moon”. If the market’s confidence in crypto is so high, then why do we still price goods and services purchased with crypto strictly in terms of Fiat exchange rates?
The real turning point for mainstream cryptocurrency adoption
While we have certainly reached a point of no return there is still a long way to go until mainstream adoption. Part of my definition of mainstream adoption includes seeing crypto denominated prices of goods and services. That’s when we’ll know we’ve made it.
The obvious barrier to crypto denominated pricing seems to be the price volatility of cryptocurrencies. However, it could just be crypto denominated pricing of goods and services that is the cure for volatility.
How Pricing In Cryptocurrency Would Reduce Price Volatility
If the market’s confidence in Cryptocurrencies was high enough we could start seeing crypto denominated prices instead of fiat.
For example: Instead of selling something in bitcoin for say $100.00, it could be sold for a fixed amount of BTC/LTC/ETH (eg: 0.008 BTC).
I think this would help to stabilise volatility some degree if there were a few larger companies doing this (eg: microsoft/expedia).
I believe there are a few reasons for this:
- It would reduce the some of the volatility that is attributable to FUD. If investors knew they could purchase goods/services with x amount of BTC regardless of BTC:USD price, then I think the effects of fear selling would be somewhat mitigated.
- It would create some consensus as to what the value of a Bitcoin (for example) is worth. I think this would be a real turning point.
- If people could buy laptops, for example, from Microsoft cheaper if they used BTC then the demand for BTC would increase until the price of BTC increased and this price arbitrage ceases to exist. However, if the BTC price was relatively higher, then people would just use USD/EUR/AUD/CNY etc instead and the demand for BTC would be less due to that higher price.
Of course these kinds of sales would need to account for a high volume of BTC transactions in order for this to work. I guess the incentive for a large company to actually do this would come from the potential increase in crypto prices that would result from this. The trading volume would occur naturally due to arbitrage i guess. If prices fluctuated then people could buy/sell goods in which ever currency is relatively higher.