Late last year, (BYON -2.58%) announced that it would start accepting payments in Bitcoin – the stateless currency that flees from credit card fees and central bank oversight – sometime in mid-2014. But Overstock CEO Patrick Byrne is an impatient man. So, he decided to jumped on the Bitcoin bandwagon months ahead of schedule.

Overstock is the largest online retailer yet to embrace this new-age technology. Will (AMZN -0.34%) follow suit?


Is Bitcoin good for Overstock?

"Bitcoin's first day on Overstock was a huge success," Byrne tweeted last Friday. During the first full day of accepting the virtual currency, Overstock's digital tills counted an additional $130,000 in sales, which translated into 840 orders. Most of these orders were placed by brand new clients.

Overall, Bitcoin's total take for the day represented around 4% of the retailer's average daily revenues – a drop in the bucket, but not bad for the first day, right?

Is Overstock good for Bitcoin?

Byrne told CNN International that Overstock's involvement with Bitcoin could help solve the currency's "chicken-and-egg problem" -- the only way to decrease Bitcoin's extreme volatility is to increase the overall size of the Bitcoin system. In turn, the only way to increase the size of the system is by having a currency that's stable enough to be useful. But is Overstock really doing that?

Overstock teamed up with Bitcoin wallet and merchant services provider Coinbase, which has introduced an "instant exchange" feature. Merchants can immediately convert Bitcoins to U.S. dollars, once the transaction is complete. This means that Overstock is avoiding the risk that stems from Bitcoin's constant ups and downs, but is only temporarily contributing to the Bitcoin economy. It's not using the currency to buy merchandise from suppliers since, as Byrne says, they don't accept it yet. And it's not making any investments using Bitcoin, at least for the time being.

Overstock helped push the digital currency further into the mainstream. However, a "true Bitcoin believer," as Byrne claims to be, would hoard it or even better, would find a way to use it by, let's say, reaching out to suppliers who do accept it or by trying to convince others to do so. In this way, Overstock could indeed enable the "digital gold" to thrive on positive "network externalities."

Will Amazon join the Bitcoin club?

Byrne thinks that sooner or later, the big names in the online retail business, and particularly Amazon, will jump on the Bitcoin bandwagon as well.

According to Nicholas Colas, chief market strategist at ConvergEx Group, the early Bitcoin adopter "has been profiled as a tech-savvy male, 25 to 40, with above-average income," reported USA Today.  The typical Amazon customer fits that description. So why Amazon hasn't tapped into the "borderless currency" market yet?

Overstock grabbed a piece of the U.S. Bitcoin market, which, though still tiny in size, is growing at a fast pace. Amazon could follow suit and possibly claim the lion's share. Nevertheless, the risks far outweigh the benefits, and I am not talking only about Bitcoin's volatility.

In the U.S., regulators have taken an overall soft-line approach toward virtual currencies, unlike what's been going on in China and Europe, where monetary authorities have given Bitcoin a thumbs down on more than one occasion. In December 2013, China barred financial institutions and payment companies from handling Bitcoin transactions – a move that eventually caused the currency to plummet by as much as 50%. Several European countries have issued statements urging consumers to steer clear of virtual coins, and in some cases, have imposed taxes on Bitcoin profits.

For Overstock, trying to cash in on Bitcoin's popularity in the U.S. makes sense since international sales were less than 1% of total net revenues for the three and nine months ended Sept. 30, 2013.

How can Amazon, a retailer that derives a considerable portion of its revenue from countries outside the U.S., be sure that the whole virtual-currency frenzy won't flame up with regulators worlwide being ready and willing to add fuel to the fire? It could allow solely U.S.-based customers to pay with Bitcoin. However, why bother with a market that may have plenty of room to gallop, but could hit a wall with no warning at all?

Final thought

From where I stand, given Bitcoin's immense popularity, accepting the virtual currency can be an easy yet effective public relations strategy. Customers are enticed into hitting the "buy" button, not necessarily because of the high quality of Overstock's merchandise or its juicy deals, but simply because it accepts Bitcoin as a method of payment.

This strategy might work wonders for Overstock's top line. However, although its decision to swap its Bitcoins for "real money" was the right one, it doesn't really get us closer to solving the currency's chicken-and-egg problem.

As far as Amazon is concerned, unless digital currencies gain legal footing in the U.S. and worldwide, enabling Amazon to calculate the exact risks and estimate the returns from this revolutionary technology, I see no reason why it should play with fire.