I noticed that a lot of people seemed confused whenever a big company starts accepting Bitcoin, and then after the price of Bitcoin declines. So I thought that I should explain why this happens, and why it is not a coincidence...

Whenever a large company like (Newegg, Dell, etc...) starts accepting Bitcoin, they are allowing customers to pay for their product with Bitcoin, however it's not that straight forward. Here is what actually happens:


  1. The customers Bitcoin payment is sent directly to a payment processing company (such as Coinbase)

  2. Coinbase sells the Bitcoin to its users (for US dollars)

  3. Coinbase sends the US dollars to the company (after taking a small fee of course)



As you can see, the company itself never actually ever holds any Bitcoin (some companies actually keep a small percent, but not many). They just enjoy the benefits of a larger customer base, those that use Bitcoin. 

So why does this make the price of Bitcoin decline?

Because when you buy a product from these companies, what you are essentially doing is selling your Bitcoin on a website like Coinbase. Even though you are not doing it directly, that is what is happening. And of course we all know, as the amount of Bitcoin being sold increases, the price decreases. Supply and demand 101.

So in summary, whenever large companies start accepting Bitcoin, they are increase the supply of Bitcoin faster than the demand.  And that is why good news for Bitcoin is usually bad news for investors.