Bitcoin Shows Some Life After a Rough Week. But Will More Merchants Accept It?

Showing resilience after recent actions that pummeled its value, Bitcoin shot up from the depths early Monday and was trading above $4,000 again. As of 10:30 Eastern Time, its price stood at $4,056, after plunging as low as $2,981 in recent days on some exchanges, according to Coindesk, which tracks cryptocurrencies.

In fact, most major digital currencies were rallying Monday morning. While Bitcoin’s value was up 12.6% over the previous 24 hours, ether had logged a 17.4% gain, to nearly $290, according to CoinMarketCap.com. Bitcoin and Ethereum, the blockchain on which ether trades, are the two largest cryptocurrencies by market capitalization. The third largest, Bitcoin Cash, a Bitcoin spinoff that started trading early last month, was up nearly 13%, to $468.

Amid the broad market rally, Bitcoin has apparently shrugged off blows it took last week that were widely blamed for plunging its price below the $4,000 mark. The biggest threat stemmed from reports that government authorities in China are preparing to shut down Bitcoin exchanges in that country, which accounts for a big share of Bitcoin mining, the heavyweight computational activity that creates new Bitcoins. On top of that, JPMorgan Chase & Co. chief executive Jamie Dimon had publicly denounced Bitcoin, calling it a “fraud” and comparing its recent price run-up to the infamous tulip-bulb bubble in 17^th-century Europe. Bitcoin started the year trading at just shy of $1,000.

While merchant interest in accepting cryptocurrencies remains lukewarm at best, that run-up has started to get the attention of merchants that sell high-end products, including luxury automobiles and motorcycles. And on Monday, a Fort Lauderdale, Fla.-based independent sales organization called Aliant Payment Systems announced it will recruit merchants for Atlanta-based BitPay, one of the world’s largest Bitcoin exchanges.

Exchanges typically levy a 1% fee to merchants for Bitcoin processing, which compares favorably to credit card rates, particularly for expensive merchandise. But fees on the Bitcoin blockchain have been rising for users as the chain gets more congested and miners exact higher fees to give priority to transactions. The average transaction fee stood at $2.40 in the second quarter, up dramatically from just 13 cents a year earlier, according to data compiled by Coindesk.

A controversial move to create more capacity by doubling the block size to 2 megabytes could come in November, though it is opposed by a number of Bitcoin market participants.