# Last edited on 2014-06-18 23:50:17 by stolfilocal
# NOT POSTED

[quote author=justusranvier link=topic=178336.msg7327118#msg7327118 date=1402848276]
[quote author=JorgeStolfi link=topic=178336.msg7324051#msg7324051 date=1402836011]Most of those businesses did not adopt bitcoin at all.  They merely agreed to accept [i]dollars[/i] from the sale of bitcoins that people already had[/quote]And where do those dollars come from?

Not necessarily from the exchanges - why do you think BitPay et al. keep getting millions of dollars of outside investment? The payment processors are turning the dollars of their investors into bitcoins. Merchants might be doing the same thing.
[/quote]

Perhaps you are thinking of Coinbase?

AFAIK, Bitpay does the opposite: the end customer sends his bitcoins to Bitpay, and Bitpay sends the equivalent in dollars to the merchant (minus their fee), at the current BTC price.  Then Bitpay has to sell those coins to replenish their dollar reserves.  A few months ago I read that Bitpay was selling on exchanges, now I don't know, maybe they are selling off-exchange.  They may make a side profit by delaying those bitcoin sales until they can get a better price.  Or they may not; I believe that they sell as soon as possible to avoid excessive risk.  The money Bitpay gets from investors goes towards hiring staff, maintaining their site, advertising their services to merchants,  and paying other working expenses.  The return for those investors is dividends that come mostly from the fees that Bitpay collects.  Is this incorrect?

From what I see, smart "investment in the bitcoin economy" is not buying or speculating with bitcoins, it is in businesses that collect fees or other profits from bitcoin activity:  mining pools, sale of mining equipment, exchanges, payment processors, [b]management[/b] of bitcoin funds (i.e. in SecondMarket, not in SecondMarket's BIT fund), etc..  Those businesses can be profitable even if the BTC price just flaps or flops over the next year.  

Of course those investors have an interest in keeping the price up, because that will cause more bitcoin activity  and therefore more fees for them.  (That is surely why Barry Silbert announced his intention to bid on the USMS auction: to calm those speculators who were dumping for fear of those coins hitting the open market.)  But those investors will not spend an extra 10 million to prop up the price, if that will only get them 5 million in return.