Bitcoin Looks to Gain Traction in Payments

Bitcoin

prices have more than tripled in 2020 and are hovering around $26,600, making millionaires out of hoards of investors who piled in to ride the popular momentum trade. Professional investors such as

Stanley Druckenmiller

and companies like Massachusetts Mutual Life Insurance Co. began investing this year. Companies like Robinhood Markets Inc. and

PayPal Holdings Inc.

allowed their customers to buy and sell bitcoin.

Despite those inroads, industry watchers say bitcoin must gain traction as a form of payment to become more ubiquitous. Spending it isn’t easy. Few merchants accept it, and many people are still unfamiliar with the cryptocurrency. Its use is generally limited to high-end purchases, like those at Mr. Dossa’s dealership.

Bitcoin, introduced in 2008, was designed to operate as a form of electronic cash, allowing users to exchange value as quickly and cheaply as sending an email. In practice, its adoption was hampered by several factors. In early years, it was difficult for average users to operate the digital wallets that stored their holdings. Many of the companies that tried accepting bitcoin in 2014 and 2015, including

Expedia Group Inc.

and Dell Inc., later quietly dropped it.

Bitcoin bulls say the tide could begin to turn next year. Two months ago, PayPal Holdings Inc. opened its platform up to bitcoin, allowing its 361 million users world-wide to buy or sell the asset. In early 2021, it will expand the options, allowing users to tap their bitcoin balances for payments to any of the 28 million merchants that use PayPal.

That venture has the potential to bring bitcoin into the mainstream. Still, there are several roadblocks on bitcoin’s path to widespread use as a form of payment.

The first is bitcoin is notoriously volatile—about a month after peaking above $19,000 in 2017, it had lost nearly half its value. For some sellers, that could mean charging a premium to customers who pay in bitcoin to cover the risk of a sharp U-turn in price before they can convert the payment to dollars.

In the case of Mr. Dossa’s dealership, its fee for bitcoin buyers is 1% of the purchase price, equivalent to the transaction fee of BitPay, a payments-software startup that exchanged bitcoin for U.S. dollars and wired the money to Mr. Dossa.

The…