Will Mt.Gox Suddenly Become the Number Two Exchange?

The announcement from Okpay is really interesting for a number of reasons.

At the moment, Okpay is not paying very much for your Bitcoins; $2.63 USD when you can sell them on Mt.Gox for $2.95.

Okpay, however, grew its userbase to 300,000 in one year, and that was the number reported six months ago. How many accounts are there now? 500,000? By contrast, Mt.Gox had 38,000 accounts back in June. We're now staring down the barrel of a Bitcoin exchanging businesss that is over ten times the size of Mt.Gox. The only difference is, they don't sell Bitcoins; they only buy them.

What if, next month, Okpay announces that they sell Bitcoins as well? It would make good business sense, because they would avoid the fees associated with selling Bitcoins on an exchange, converting the currency, and transferring the money back to their accounts. They would also potentially become the number one Bitcoin exchange.

What would be the effect on the Bitcoin economy?

Let's say I was a regular Okpay user that carried a balance on the site, and I came across a Bitcoin merchant or service that appealed to me, like, I don't know, a casino or virtual goods marketplace and I wanted to do business with them. I'd buy Bitcoins, of course.

So, in theory, if Okpay were to sell Bitcoins, there would suddenly be tens of millions of dollars, i.e., a sum greater than the current value of the Bitcoin economy (I'm guessing here - assuming $20+/account on average), sitting in an exchange with the potential to be converted into Bitcoins. The number of potential Bitcoin users would also jump dramatically, by hundreds of thousands. At that moment, Mt.Gox would seriously find itself threatened.

Instead of money flowing towards Bitcoins, Bitcoins might now end up flowing towards the money. This would be the small-time equivalent of a bank offering Bitcoins to its customers, which would immediately remove all of the hurdles that people currently have to deal with to get their hands on Bitcoins.

All you investors and traders out there, I recommend you keep an eye on this site; it could represent the tipping point for Bitcoin.

Posted in: exchange,okpay,tipping point