This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Why Amazon Will Eventually Take Bitcoin, Or Something Like It

Stocks in this article: AMZN

NEW YORK (TheStreet) -- There's been a TON of news recently about Bitcoin and its impact on the future of currency, transactions and the way we live.

Initially I was bearish on Bitcoin because I saw it as a fad. However, the more I read about it, and the more I understand it, I believe Bitcoin, or something like it, will eventually happen in the mainstream. When it does, it looks like it'll be a no-brainer for Amazon (AMZN) to accept it as payment.

Reputed venture capitalist Marc Andreessen (full disclosure: Marc and I have talked quite a bit on Twitter about a number of things, including Dropbox and Anki Drive), has a great article on why companies such as Amazon will take Bitcoin for payment: it's all about margins.

The following is an excerpt from an article Andreessen wrote, with the quotes coming from Chris Dixon, Andreessen's partner at his venture capital firm, Andreessen Horowitz:

"Let's say you sell electronics online. Profit margins in those businesses are usually under 5 percent, which means conventional 2.5 percent payment fees consume half the margin. That's money that could be reinvested in the business, passed back to consumers or taxed by the government. Of all of those choices, handing 2.5 percent to banks to move bits around the Internet is the worst possible choice. Another challenge merchants have with payments is accepting international payments. If you are wondering why your favorite product or service isn't available in your country, the answer is often payments."

Everyone makes fun of Amazon for its grossly thin operating margins, being 2% this quarter. That's actually higher than what they had been throughout 2013, coming in at 1.1%, 0.5% and -0.1% for the first, second and third quarters, respectively.

During the fourth-quarter, Amazon earned 51 cents a share on $25.59 billion in revenue, which missed analyst estimates.

Assuming Amazon's margins stay razor thin, in the 2% range, by accepting Bitcoin and cutting out middlemen such as Mastercard (MA), Visa (V) and Discover Financial Services (DFS), Amazon can grow earnings without having to do much.

Amazon has already moved in the way of trying to boost earnings, by hinting that it could raise the cost of Amazon Prime, due to fuel surcharges and other expenses. Currently, Amazon Prime costs $79 per year, and allows users to get free two-day shipping, as well as digital streaming content, akin to Netflix (NFLX).

Aside from boosting margins, the Andreessen article goes on to make the point about Bitcoin being a protection against credit card fraud, and a host of other reasons why merchants should accept Bitcoin.

For now, Amazon is not taking Bitcoin, but (OSTK) , its competitor, is. Overstock CEO Patrick M. Byrne has said in the past he believes Amazon will be forced to accept Bitcoin as payment.

There may be long-term promise in the cryptocurrency, as former Federal Reserve Chair Ben Bernanke has said in front of Congress. We'll see whether Amazon decides to take Bitcoin or not. Judging by Andreessen's article, it seems as if it's only a matter a time.

--Written by Chris Ciaccia in New York

>Contact by Email.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs