There’s been a rumour making its way around the cryptocurrency community that Amazon might be accepting Bitcoin payments soon. Is this rumour true? Can Bitcoin’s recent bull run be explained by a combination of massive insider trading and speculation, or simply just speculation? Here’s everything we know so far.
The rumour started with a leaked newsletter from the paywalled The James Altucher Report back in September. In the newsletter, Altucher states that:
I am certain Amazon WILL ACCEPT Bitcoin. They have no choice. And this will be the tipping point that will create massive generational wealth unlike we’ve ever seen before. Given the company’s history of staying ahead of its retail rivals… Amazon could make the announcement as early as October 26 at 4pm during its next earnings conference call.
The implications of this newsletter, if what was claimed was true, were huge and it definitely got people talking. As expected, there was a healthy amount of skepticism as the newsletter cited zero concrete sources and it just sounded like Altucher was speaking out of his ass. Even though people were doubtful and many thought it was just a sophisticated marketing ploy by Altucher to get people to sign up to his private newsletter, the newsletter still seeded the idea in many people’s minds.
Rumour mill churns
Soon after the newsletter leak, Squawker published an article on September 22nd titled “BREAKING: Amazon Will Accept Bitcoin By October”. The article’s only source was Altucher’s newsletter. CoinTelegraph than followed up with an article titled “Unverified Rumor Circulating That Amazon May Accept Bitcoin By October” on September 24th. The article cited Squawker’s article. Next was Investopedia’s turn to churn the rumour mill. Investopedia published an article on September 25th titled “Rumor: Amazon to Accept Bitcoin”, citing the Squawker article. A second Investopedia article, also discussing the rumour, was published on September 27th.
Articles related to the rumour continued to be published throughout October and the article publishing pace picked up right before the Amazon’s October 26th earnings call. Die Welt, a large German national newspaper, published an article on October 24th titled “Steckt Amazon hinter dem Bitcoin-Boom?” (“Is Amazon behind the Bitcoin boom?”). The article cited Altucher as the original source of the rumour but also added that “Fintech circles in Silicon Valley now supported this speculation”. Welt, in fact, reached out to Amazon for comment on the rumour and an Amazon spokesperson replied that they do not engage in speculation and only release new products when the products are useful for their customers. With the October 26th date so close, Die Welt’s article really added fuel to the flames as the newspaper was considered a legitimate mainstream source. Futurism.com and CoinTelegraph were quick to respond and swiftly released articles on the rumour, citing Die Welt.
Amazon earnings call disappoints
As we now know, Amazon’s earnings call happened and no mention of Bitcoin was made. Amazon’s stock price, however, did very well and gained more than 10% after the call. This didn’t dampen people’s hopes though and many are claiming Amazon might still make a Bitcoin-related announcement soon. After all, Altucher’s newsletter never said that the announcement would be made on October 26th, only that it could be made as early as October 26th.
Why I don’t think Amazon will accept Bitcoin anytime soon
Bitcoin can be inconvenient to use
Bitcoin, even with Segwit, has an abysmal maximum transaction throughput, high fees, and agonizingly long confirmation times. Bitcoin, even with Segwit, only supports about 14 transactions/second at maximum. I can guarantee that Amazon’s transaction volume is many many times more than 14 transactions/second. Once Amazon starts accepting Bitcoin, watch for the network to be clogged with fees rising uncontrollably. This is not good for Amazon, its customers, nor Bitcoin’s network.
Bitcoin is volatile
Bitcoin is volatile and a large price change within a short period of time hurts either party of a payment transaction. Imagine buying an iPhone for 0.2 BTC and then having Bitcoin’s price drop 20%. The seller practically sold the iPhone at a 20% discount. The seller lost and the buyer won. The opposite happens if Bitcoin were to rise 20% in price after the transaction. Price volatility makes Bitcoin a terrible mdium of exchange as people are less willing to transact due to the increased risk. A growing economy requires high money velocity and currency volatility slows down money velocity.
Murky government regulations
Governments are mostly undecided about cryptocurrencies. Some, like Japan’s and Switzerland’s, have practically fully embraced them but others are usually against cryptocurrencies or on the fence. This is largely true for North American governments and many European governments. Government officials are hesitant to enact policy that could be the wrong policy. The question ultimately comes down to regulation or an outright ban. There is no question that in an unregulated system, cryptocurrencies can significantly hurt a society. Can regulations control this decentralized beast?
Nevertheless, the point is that government indecision discourages companies from doing anything with cryptocurrencies. A company could spend a large amount of resources offering a cryptocurrency product, only to have cryptocurrencies banned the very next day. Large corporations, like Amazon, are usually risk adverse and will default to inaction given government indecision.
Bitcoin’s recent bull run could be fake
There are suspicions that Bitcoin’s bull run this year has been fueled by wash trading, spoofing, and the careless printing of hundreds of millions of USD Tethers. All these allegations center around one of the largest cryptocurrency exchanges in the world, Bitfinex.
I don’t want to resummarize the research done by Bitfinexed on the supposed shady activity going on with Bitfinex and USD Tethers. If you’d like to read more on these allegations, do check out his/her Twitter account. Also, here’s a great article to get you started with: “Are Fraudulent Tethers being used for margin lending on Bitfinex?”.
I’ve read through Bitfinexed’s work and I definitely think there is some legitimacy to his/her allegations.
Who is James Altucher?
Finally, we need to talk about James Altucher, the man who started the Amazon/Bitcoin rumour. Altucher graduated from Cornell University with a bachelor’s degree in computer science in 1989. Apparently, he also attended Carnegie Mellon University as a doctoral student in computer science but it’s not clear if he graduated from the program.
Altucher’s Wikipedia page paints a colourful career for him. His first job after graduating was at HBO in the IT department. In his time at HBO, he somehow managed to host an HBO program called III:am where he roamed New York late at night to interview residents.
Altucher is an entrepreneur; he founded Reset Inc. in 1998 and sold it for $10 million. In 2006, he founded a financial social network called StockPickr. The website was named one of Time Magazine’s 50 Best Websites of 2007, and was sold to TheStreet.com that year for $10 million.
Altucher has also dabbled in hedge funds. From 2002-2005, he traded for several hedge funds and from 2004-2006, he ran a fund of hedge funds.
Altucher is also an investor, investing in Buddy Media which sold to Salesforce.com for $745 million. He has also invested in other ventures like bit.ly and Ticketfly.
Altucher is a writer and a prominent media personality. He has written and published 17 books. He was a columnist for The Financial Times and has appeared on CNBC, Fox News Channel, Fox Business Network, Bloomberg TV, and CNN Radio.
Currently, he runs several podcasts and paid investment newsletters.
Among so many accolades, Altucher has also been called a fraud. I personally haven’t researched allegations that Altucher is a fraud though I have seen claims pop up here and there. I’m not going to choose a stance though I do want to say this: there is a fine line between an internet marketer and an author and Altucher is certainly straddling this line. This might have prompted some to feel uneasy about him and deem him untrustworthy.
Here is an excerpt of his response to a Quora question asking if Altucher is a fraud:
I am a fraud. When I’m in a room full of people I can’t think of anything to say. They all seem smarter than me. This has happened to me since I was a kid. Since I peed in my pants in school one day and had to hide it from everyone else. When I speak, it feels like I am acting. I am just reading a script. Every time I do a podcast I try to become interesting because I really just want to be friends with my guests. When people look at me, I feel like they think I’m ugly. I feel like they are looking at me and saying, “this guy looks like a criminal”. People read my writing and then they meet me. Maybe they add up the differences between what they read and what they see in front of them. I am much more shy in person than I am on a paper. I feel like a police sketch. Like my writing shows bits and pieces and then there is so much more garbage underneath and people only see the surface. And they meet me they see even less.
Read the full post here.
Altucher could be a fraud, or he could just be a seasoned internet marketer. Perhaps his “leaked” newsletter that started the Amazon rumours was not designed to start the rumour, but was just heavily misinterpreted by some who wanted the rumour to spread and pump Bitcoin’s price. Perhaps Altucher just chose to speak his mind and used a few strong words along the way. Either way, I think his predictions in the “leaked” newsletter are wayyy off the mark.