High-End Merchants Look to Cash in on Wealth Effect From Run-up in Bitcoin’s Value

Bitcoin has taken a beating in recent days, but investors who bought earlier this year are still enjoying handsome returns. Now, some merchants of high-end goods are signing up to accept the virtual currency, hoping to cash in on that wealth effect.

Bitcoin was trading at $3,498 early Thursday morning, having dropped below the $4,000 level on Wednesday for the first time since Aug. 22, according to Coinmarketcap.com. Indeed, the slide came less than two weeks after Bitcoin very briefly climbed above $5,000.

Experts chalked up the dip in value to profit-taking, though recent reports that government authorities in China might soon shut down the country’s Bitcoin exchanges also played a key role. That’s because much of the mining activity for Bitcoin—the creation of new coins through solving mathematical problems—takes place in China.

As if that weren’t enough, JPMorgan Chase & Co. chief executive Jamie Dimon on Tuesday told attendees at a financial-service conference that Bitcoin is a “fraud,” that it compares to the tulip-bulb bubble in the 17^th century, that those investing in it are “stupid,” and that he’d fire any trader he found buying it.

Nonetheless, Bitcoin has enjoyed a heady ascent since the start of the year, when it traded at just under $1,000. And now, holders of the virtual currency may be looking to spend their newfound wealth. That’s what some merchants of high-end goods are banking on. Old Road Harley-Davidson, a motorcycle dealership in Santa Clarita, Calif., for example, is preparing to accept its first Bitcoin transaction. It will take the currency for bikes valued in the tens of thousands of dollars, but also for specialized clothing it sells to Harley enthusiasts—everything from jackets to socks and underwear, says owner Mike Moffett.

Old Road is using BitPay, an Atlanta-based exchange, to handle its transactions, though it has also applied with Coinbase, a rival exchange in San Francisco. Its fee for Bitcoin transactions is 1% of the value, which, as Moffett enthusiastically points out, “is less than most credit cards.” The exchanges will convert the Bitcoin into dollars and deposit the funds into Old Road’s bank account, Moffett says. Bitcoin, he says, is a supplement to credit cards at his shop, not a replacement.

So far, with the run-up in value just this year, Old Road has found customers ready to buy big-ticket goods. “People want to use the gains from investing in Bitcoin,” says Patrice O’Grady, general merchandise manager.

Old Road isn’t alone. It was inspired to take advantage of that market spike when it heard a car dealership was taking Bitcoin. And not just any car dealership, but Newport Beach Lamborghini down the road in Costa Mesa, which sells supercar models ranging well into the hundreds of thousands of dollars. Moffett says he has heard of a Ford dealership and a Dodge dealer, both in other parts of the country, accepting Bitcoin.

Estimates are that around 100,000 merchants globally take Bitcoin, though that number is hard to pin down. Since there is no central authority for Bitcoin, merchants can start accepting it—and stop taking it—without any official notice.

To be sure, Moffett is likely somewhat more schooled on cryptocurrency than the typical Harley dealer. He mines Ethereum in his spare time, for example. And, he points out that the total supply of Bitcoin is limited by its underlying code to 21 million coins. The total supply currently is just shy of 16.6 million. As a result, he’s not fazed by the prospect of a rout in the market.

“When it spikes up, you’ll see people coming out of the woodwork [to spend it]. But we did it [accepting Bitcoin] more as a long-term play,” he says. “There’s a lot of room for growth, and there’s only so much Bitcoin out there.”