Stock Market Reactions to Adoption of Cryptocurrency as a Payment Instrument

Abstract

The adoption of cryptocurrency as a payment instrument by firms has sparked ongoing debates about how such strategic moves are perceived by key stakeholders. This study investigates how investors react when an e-commerce firm adds or withdraws from providing cryptocurrency as a payment option. To explore these aspects, we examine two cases: MercadoLibre’s decision to introduce Meli Dólar as a payment option, representing the inclusion of cryptocurrency, and eBay’s withdrawal from the Libra project, representing strategic exclusion. We assess the causal impact of these strategies by employing a Regression Discontinuity Design (RDD) and deriving the observation period by using an optimal bandwidth method. The results indicate that there was an immediate decline in share prices following the adoption of the Meli Dólar as a payment instrument and an immediate increase following the decision to withdraw from using Libra as a payment instrument. The findings suggest that including cryptocurrency as a payment method may run counter to investor expectations. This study contributes to the discourse on the viability of cryptocurrency adoption by e-commerce firms and emphasizes the importance of understanding how decisions around cryptocurrency convey market signals, which may have strategic implications for a firm’s overall strategy.