Bitcoin’s Costs Have Plunged In Recent Months, But Its Volatile Value Could Scare Merchants

When the price of Bitcoin spiraled to dizzying heights last year, so did its costs for those who wanted to exchange the digital currency rather than hoard it. Places that accepted Bitcoin, some of them for years, announced they would stop taking it.

Since December, Bitcoin’s price has famously slid by thousands of dollars. What’s often overlooked, though, is that its transaction costs and confirmation times have dropped dramatically as well. That makes the currency more attractive as a means of exchange, but its volatility could remain a barrier to widespread acceptance.

In early December, online-games distributor Valve Corp. posted a notice on its site announcing it would no longer take Bitcoin for payment. Stripe Inc., the e-commerce transaction processor, followed suit in January with a blog post saying it would stop supporting Bitcoin for its merchants as of April 23. These and other companies that had been early Bitcoin enthusiasts cited soaring costs and pokey transaction times for a payment method that was supposed to be cheap and fast.

On Dec. 6, the day Valve made its announcement, Bitcoin’s price was near $13,000, on a trajectory that would lift it almost to $20,000 within two weeks. That pleased investors. Less pleasing, for users and merchants, was the average confirmation time for transactions on the increasingly crowded Bitcoin network: two hours and 10 minutes, according to Blockchain.info. Meanwhile, the median transaction fee, payable by those who spend Bitcoin, hit $3.93 that day, according to Bitinfocharts.com. Bellevue, Wash.-based Valve complained that transactions took so long that price changes in the meantime often required customers to conduct a second transaction, at yet another fee.

By Jan. 23, when Stripe posted its notice, Bitcoin transactions had “become about as expensive as bank wires,” said the author of the post, Tom Karlo, product manager for payment methods. Officially, the median cost had climbed to $5.14, while the average confirmation time had climbed to a staggering 32 hours.

Stripe, which has supported Bitcoin processing since 2014, gave 90 days’ notice. A spokesman was not available Monday to say whether the San Francisco-based company might change its mind.

It could have some reason to do that. While all eyes have been focused on Bitcoin’s price, its cost and transaction time have calmed down dramatically since January. The median fee stood at 13 cents late last week, while the average confirmation time was a comparatively swift 17 minutes. Indeed, the fee has stayed under a quarter, and the transaction time under half an hour, since the middle of last month.

What remains problematic, in the eyes of many critics, is Bitcoin’s price volatility. A year ago, the currency commanded a relatively robust $1,153, but that figure has since see-sawed to $19,535 just before Christmas and its current value just shy of $6,700. Even with hastier transactions, swings like that can make it hard for merchants to be sure the coin, like a greenback, is worth the same at the end of the deal as it was at the start.