There has been much hype of late when news circulated about eBay’s quasi-announcement (on eBay Classifieds) that the e-commerce giant will start allowing for the sale of digital currencies in a specially designated virtual currency category, starting February 10 . In the UK only, for now. And under eBay Classifieds only. Auctions or Buy-it-now functionality, the whole raison d’être of eBay, will not be supported. The very limited scope of this development is sufficient not to make a mark in the bitcoin market, which it hasn’t.
Even if typical eBay functionality would be supported, it essentially becomes a primitive market for buying and selling bitcoins. You can easily and more efficiently do that on one of the many exchanges, likely for cheaper.
What may have been missed by many is the fact that this classified virtual currency category already exists in the US, eBay’s prime market. You can view it here.
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If you look at how this development became public knowledge, it was not exactly a scheduled press release. It was posted on their eBay Classifieds site. It came at the same time as the company stumbled to clarify its stance on cryptocurrencies and equipment, the difference between the two being a point of confusion internally amongst operating personnel. It is a carbon copy of the story of its child company, PayPal, last week when a user had his mining rig posting removed based on a misunderstanding of “currency”. The error was later corrected and CEO David Marcus sought to reassure the bitcoin community of his pro-bitcoin position. These announcements are largely reactive damage control for these mishaps.
The real big bang would come on the day when eBay announces that it will start accepting Bitcoin for payment, which would constitute a move of astronomical proportions. Bitcoin markets, and markets for every other cryptocurrency in existence or in “generation” would go crazy in a monumental turning point as cryptocurrency effectively becomes “legal” tender to buy virtually anything and everything (with the exception of the illegal stuff which will never make it onto eBay but has likely played a huge role in advancing Bitcoin’s value. To that end, such a development will actually be a great litmus test for Bitcoin’s value outside of the underground world).
This isn’t happening anytime soon. Bitcoin prices are far too volatile for an e-commerce giant of that size to accept it without exposing its financial performance to “cryptocurrency risk”. To hedge against this via exchange in the BTC market is not practical for a company transacting $1000 every second. Although Overstock did start accepting Bitcoin, they transact but a fraction of eBay’s volume and don’t flood the bitcoin market with excessive sell orders. It also gets complicated when transacting in non-US based currencies, as many of these don’t share highly liquid markets with BTC. Finally, the generally rigid and conservative spirit toward compliance and regulation makes for a cultural hurdle that must first be cleared. The cryptocurrency market needs to become far more expansive and mainstream for this to happen, the catch being that crypto-expansion itself first requires greater acceptance as a form of payment.
Another irony is the fact that governments around the world refuse to recognize the bitcoin as currency, yet eBay & Co, who endeavor to maintain top-notch adherence to the spirit of regulation, have refused to allow it precisely because they do consider it currency.