Is Bitcoin a slam-dunk as the currency of the future? The Sacramento Kings seem to think so. The NBA team recently became the first pro sports franchise to accept Bitcoin as a form of payment. Basketball fans will be able not only to purchase tickets and merchandise online with the digital cryptocurrency, but also to use it to buy souvenirs at the arena come game time.
The team is the latest in a growing number of commercial entities finding a slot in their virtual cash registers for Bitcoin. Little by little, momentum is building for a widespread acceptance of the upstart currency.
The Kings' drive towards the Bitcoin basket comes a week after the big online retailer Overstock.com (OSTK) announced it would start accepting payments in the currency.
The move was an instant hit -- the first day the company had the nifty Bitcoin button as an option in its shopping cart, its customers used it to make more than 800 transactions for total sales of around $130,000.
Overstock.com was by no means the first online marketplace to accept the currency. Numerous web retailers have been doing so for some time. It's a natural fit, %VIRTUAL-article-sponsoredlinks in a way, since Bitcoin exists solely in the digital realm. Customers booking flights on discount travel operator CheapAir.com, for example, can use Bitcoin to buy their tickets, as can love seekers on dating site OkCupid, owned by IAC/InteractiveCorp (IACI).
These digital players are going to have plenty of company. Earlier this month, online games purveyor Zynga (ZNGA) started to dip its toes in the water, announcing that it was testing Bitcoin payments for some of its titles in conjunction with specialist transaction facilitator BitPay.
But if Overstock.com didn't get there first, it's still the largest and most prominent e-retailer to take the Bitcoin plunge thus far. This is a big win for the currency and its advocates, and Overstock.com will surely be followed by more well-known companies both online and off.
In Bitcoin We Trust?
Acceptance of the currency does seem to be gaining momentum, but it's still considered too speculative an investment for many. This is partially because of its immaturity as an asset (Bitcoin came to life only in 2009), and partially because it's still tarnished by its association with illicit activity. The U.S. government's take-down of the online illegal substances marketplace Silk Road last year led to the recent seizure of nearly 30,000 Bitcoins, which at current market prices have a value somewhere in the neighborhood of $25 million.
Institutional resistance is also a factor. Compounding the bad PR of the Silk Road mess, and coming around the same time, China's central bank banned the nation's financial institutions from accepting Bitcoin in their transactions. That move was not only discouraging, it also put the brakes on a wild global speculative run in Bitcoin that had been powered to a significant degree by Chinese buyers. That rally saw the U.S. dollar exchange rate of the currency zoom from $100 apiece at the end of last July to over $1,200 barely four months later. The exchange rate has since come down, but it's still fat; it's in the mid-$800s as of this writing.
But most important of all, Bitcoin so far isn't being taken seriously enough by major financial players and noted economists. Some of the currency's strongest selling points are glaring weaknesses from their perspective -- its decentralized nature, and the fact that it is a finite currency (only 21 million will ever be "minted"). These elements theoretically free it from potentially negative political influences and shield it from short-term economic shifts but, crucially, also rob it of flexibility.
After all, one of the key reasons central banks exist is to manage a nation's money supply. When done correctly, this allows countries to more or less match the amount of money in circulation with the goods and services available in an economy, keeping inflation in check and deflation at bay. There's basically no possibility of that sort of management with Bitcoin.
A Commercial Tide
Those concerns and drawbacks aside, it's obvious that the Bitcoin wave will continue to rise. The more small and medium fish like Overstock.com and the Kings enter the water, the higher the chance that the behemoths will jump in to join them. It'll really take off when and if giants such as Amazon.com (AMZN) and Walmart Stores (WMT) add the currency's button to their checkout pages.
At the moment, many central banks and financial pundits are hostile to Bitcoin. But its popularity is coming from the ground up with consumers -- and they want to use it to buy things like blue jeans and basketball tickets.
Bitcoin will almost certainly win wider acceptance in the commercial world. The real question is how much momentum it's got, and how far it can ride as a viable, useful currency.
Motley Fool contributor Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Amazon.com.
Want to succeed? Then you need goals!View Course »