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Bitcoin in the real world

November 19, 2021

Table of Contents

In this section, we’ll walk you through how to use your Bitcoin, whether as a currency or an investment, without breaking any laws. We’ll go over how to use Bitcoin to purchase pretty much whatever you want through a variety of ways. Then, we’ll take a very quick look at Bitcoin as an asset, going over the pros and cons of using it as an investment vehicle.
Finally, we’ll make a date with The Man to discuss rules, regulation, and taxation of Bitcoin across the world.

Actually Buying Stuff with Bitcoin

As with any currency, Bitcoin can be exchanged for goods and services. At this point in time, the number and type of those goods and services is more or less infinite, with difficulty levels ranging from trivially easy to very involved.

At this point, it’s possible to pay with Bitcoin online and in brick and mortar stores. Just be warned: if you pay in person with Bitcoin, you might need to wait for a bit for the transaction to get confirmed enough times.
Paying with Bitcoin online is usually very straightforward. Retailers will either provide a wallet address, a QR code, or route you to a payment server. Popular Bitcoin payment services include BitPay, CoinGate, Flexa, and Coinbase. Paypal has recently started to support Bitcoin payments for customers in the U.S., with the exception of Hawaii residents. 1
Payment processors generally comply with KYC regulation, and demand that users create an account and submit documentation. If you’re looking for a more anonymous experience, stick to P2P transactions.

Plenty of retailers accept direct Bitcoin payments. We’ve included a non-exhaustive list below:

  • Cars: BitCars, AutoCoinCars
  • Private jet: Aviatrade, PrivateFly, GlobeAir
  • House: Bithomme, cryptocurrency REITs
  • Socks: Mt.Socks
  • VPNs: NordVPN, Surfshark, ExpressVPN, Cyberghost and ProtonVPN
  • Flights: CheapAir, Travala
  • Watches: BitDials
  • Gold: Bitgild, European Mint
  • Vidya: Xbox, Playstation
  • Art: Sotheby’s, Singulart, Maecenas, Crypto Emporium
  • Domain names: Namecheap, monovm, Domains $ Bitcoins
  • Servers + hosting: server room, clouviper, coin.host
  • Tech: Newegg, Microsoft, Rakuten
  • Charities: The RNLI, Unicef, American Cancer Society, American Red Cross, Save the Children, National Society of Black Engineers, Friends of Notre-Dame De Paris, and hundreds more
  • Food and drink: Starbucks (via app), Whole Foods, some Subway, Lieferando.de

Gift cards

If you can’t buy something directly with Bitcoin, you can almost certainly buy a gift card with Bitcoin and then buy it. Popular gift card sites include Gift Off, BitRefill, Purse.io, and Gyft.

Debit cards

More and more exchanges are starting to offer debit cards. Debit cards convert your crypto to fiat live, while others have an app where you top up the card with Bitcoin.

Every exchange has a unique offering. Exchanges that offer debit cards include Crypto.com, BlockFi, Coinbase, BlockCard, Wirex, Nuri, and Cryptopay.

Investment

Some investors would be horrified at the thought of buying a coffee with Bitcoin. These are generally the types who believe that it has the most value as a speculative asset. The cautionary tale is Bitcoin Pizza Florida Man. He famously spent 10,000 bitcoins on a pair of pizzas. At the time of writing, those pizzas would be worth a cool $342 million. Thankfully, the guy himself has no regrets, and is happy to be a cultural icon. 2
Bitcoin’s status as a speculative asset is controversial. Cryptocurrency prices are notoriously volatile, and Bitcoin is no exception. Regulatory crackdowns can cause value to plummet, as evidenced by market response to China’s repeated moves to squash cryptocurrency use within the country. 3

Proponents argue that Bticoin is a good store of value due to its widespread social adoption and recognizable brand on top of its built in security.4 German funds aimed at institutional investors have been granted the ability to invest in crypto, signalling increasing acceptance of Bitcoin from the financial sector.5 Goldman Sachs has stated that Bitcoin is a new asset class entirely.6 Investors continue to flock to Bitcoin, attracted by its verifiable scarcity and use as a hedge against currency debasement and inflation. In a report from Morgan Stanley Chief Investment Officer Lisa Shalett summarizes the growing positive attitude towards Bitcoin:

For speculative investment opportunities to rise to the level of an investable asset class that can play a role in diversified investment portfolios requires transformational progress on both the supply anddemand sides. With cryptocurrency, we think that threshold is being reached. A firming regulatory framework, deepening liquidity, availability of products and growing investor interest—especially among institutional investors—have coalesced. 7

Detractors say that cryptocurrency speculation is a bubble driven with an outsized appetite for energy that is hastening the climate crisis. 8

Investing in Bitcoin – the pros. Diversifying your portfolio

No one wants to put all their eggs in one basket, and investing in Bitcoin is a great way to diversify your portfolio.

Capital appreciation

When you take a step back and look at Bitcoin’s history, the gains have been astronomical. Many investors buy and hold on to Bitcoin in the hopes of realizing capital gains. One important piece of Bitcoin lingo to note: if you see someone on a forum asserting that they plan to “hodl” their bitcoin, the spelling is deliberate. Hodling is a term derived from a very popular meme, and refers to the enthusiasm many have for keeping a tight grip on their bitcoin.

Trust no one

When you buy Bitcoin, you don’t need to put your faith in anyone, or tust some middleman to buy shares on your behalf. You can be assured that your assets exist and are actually available.

Cons

Risky Business

The greater the risk, the greater the reward, and Bitcoin is a deeply risky investment, primarily due to its volatility. In the early months of 2018, many investors lost big after the price of Bitcoin plummeted from nearly $20,000 to $6,000. Investors were stung again in 2021. Bitcoin had rallied to an all-time high of $63,000 before dropping down to $30,000.

Regulation risk

It’s impossible to know what the regulatory future of Bitcoin holds. It’s entirely possible that you’ll wake up tomorrow to find your government has outlawed holding and transacting with crypto. This has happened to people around the world, most notably in China. The risk is there, so keep an ear to the ground and pay attention to government discussions on cryptocurrency.

Tax risk

Like regulation, crypto tax is a difficult variable to predict. The only sure thing is that governments will find a way to tax it. If you want to invest heavily in Bitcoin, it’s in your best interest to work with an accountant who understands the tax implications of crypto in your country.

References

  1. https://www.paypal.com/us/smarthelp/article/cryptocurrency-on-paypal-faq-faq4398
  2. https://www.coindesk.com/bitcoin-pizza-10-years-laszlo-hanyecz
  3. https://www.reuters.com/world/china/what-beijings-new-crackdown-means-crypto-china-2021-05-19/
  4. https://www.goldmansachs.com/insights/pages/crypto-a-new-asset-class-f/report.pdf
  5. https://www.ft.com/content/c523fa52-25da-4d7e-8378-cc58bd1e6c89
  6. https://finance.yahoo.com/news/bitcoin-is-officially-a-new-asset-class-goldman-sachs-103540636.html
  7. https://advisor.morganstanley.com/scott.altemose/documents/field/s/sc/scott-a–altemose/Case%20for%20Cryptocurrency_MAR%2017%202021.pdf
  8. https://www.forbes.com/sites/hershshefrin/2021/06/09/bitcoin-bubble-will-pop-when-investors-recognize-bitcoins-huge-negative-impact-on-the-climate#:~:text=EDT%20%7C4%2C729%20views-,Bitcoin%20Bubble%20Will%20Pop%20When%20Investors%20Recognize,Negative%20Impact%20On%20The%20Climate&text=In%20February%202021%2C%20as%20the,would%20reach%20%24100%2C000%20in%202021
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