BY CNA team - August 2, 2018
Bitcoin use for payment transactions falling
Reaching critical mass in terms of transactions for goods and services continues to evade bitcoin, the first and best known of all the cryptocurrencies, going by transaction data from research start-up Chainalysis.
Its use for mostly big-ticket items versus everyday items such as groceries and coffee may have a lot to do with the lower transactions. The research did not mention the other cryptocurrencies.
And just as bitcoin price movements have an impact on the other cryptocurrencies, slower adoption does mean that the other cryptocurrencies would see an even slower take-up rate.
Bloomberg, which Chainalysis conducted the research on bitcoin transactions for, says in an Aug 1 report that, after peaking at US$411mil last September, the amount of money the largest 17 crypto merchant-processing services received in bitcoin has been on a steady decline, hitting a recent low of US$60mil.
To put things in perspective, a joint study by BNP Paribas and Capgemini estimates that global non-cash transactions will reach 577 billion in terms of volume this year and reach 644.1 billion in 2019 and 725.9 billion in 2020.
The Chainalysis research found that while the amount of merchant services such as BitPay, Coinify and GoCoin received increased slightly in June to US$69mil, it was still a far cry from the US$270mil received a year ago.
The news wire noted that bitcoin seems to have lost appeal after a rise in its use to pay for goods and services late last year.
Citing Stripe, a payment service provider, and Expedia, a travel services provider, as among companies that have stopped accepting bitcoin due to price volatility, it adds that transaction fees higher than credit-cards, put many off using it for small, everyday items. Irreversible transactions also put many merchants and consumers off using it.
Instead, when bitcoin is being used at all, it is to pay for bit-ticket items such as expensive sports cars and furniture as well as to pay vendors, especially freelancers located overseas, in which case using the cryptocurrency is faster and cheaper than traditional financial services.
Even so, Bloomberg says the decline in the use of bitcoin as a mode of payment coincided with the spike in the cryptocurrency’s price, which hit nearly US$20,000 last December.
It quotes Chainalysis senior economist Kim Grauer as saying that when the price went up rapidly last year, spending bitcoin could mean losing US$1,000.
The news wire says fundamental investors may view the reluctance of consumers to use bitcoin for transactions despite the price steadying, as a worrying sign as they believe that the cryptocurrency must have a real-world use and not just as a speculative investment, in order for it to have a store of value.