Bitcoin currency risk hedging suggestion for vendors

I came up with this when I noticed that a few vendors ask for FE because of the volatile bitcoin price.

If you're a vendor, here is what you do to eliminate the effect of bitcoin price drops on your money in escrow.

  1. Open an account on a bitcoin exchange which doesn't need KYC/AML (btc-e, kraken, bitfinex) and send it some bitcoins.
  2. When an order comes in, sell the same amount of bitcoins on the exchange to get USD.
  3. When the escrow is released, use the USD to buy bitcoins at the current price.

Every couple of days or whenever, transfer bitcoins in and out of the exchange (aka rebalance) and sell them for normal currency. If you already use that exchange to sell bitcoins you could not bother buying back and just transfer out USD.

Upside: No more currency risk.

Downside: Have to have a reserve of bitcoins on exchanges equal to all your orders, the exchanges might charge about 0.2% per trade, you have to pay the bid-ask spread each trade (which is roughly another 0.2%)

Thoughts? It seems simple, I wonder if people haven't already thought of it. If you're a vendor, how do you handle currency risk? Especially in large drops like November 2013.


Comments


[1 Points] g2n:

Honestly it's not worth it. Bitcoin is volatile, yes, and has a certain value associated with it. The U.S. dollar has a value associated with it too, and it changes every minute like Bitcoin does, but you rarely hear about it.


[1 Points] MarkFat:

LakeBTC also provides receive tool for businesses, just need register an account can be used LakeBTC receivables, and even you needn't to know what is the Bitcoin, anyway you will receive dollar.


[1 Points] primitivepacific:

I'm curious, could the sale of bitcoins in response to a DNM purchase be correlated in a way that identifies the vendor or buyer? Say I give a vendor 1.234567 bitcoin in a purchase and that vendor then turns around and sells 1.234567 bitcoin. Could this transaction be linked somehow even if they are not to and from the same wallets?


[1 Points] jadenlj:

there is doesn't need KYC/AML on btc-e and lakebtc, if you only trading.