Use of bitcoin as payment is on the decline
The use of bitcoin in commercial transactions is falling, even as volatility has eased in recent months, according to research carried out for Bloomberg by Chainalysis.
Bitcoin and the blockchain technology that underpins it was long seen as disruptive competition for online payment services such as PayPal and Apple Pay, and rivals that utilized bitcoin into their payment systems, such as BitPay and Coinify proliferated.
Some advocates of virtual currencies and digital payments even suggested that digital money would replace fiat currencies as a transmission of payment for goods and services.
Goods and services
The Chainalysis research has found, however, that the use of bitcoin to buy goods and services has declined rapidly over the past year.
After peaking at $411m in September 2017, the value of transactions at the largest 17 merchant-processing service providers conducted in the biggest cryptocurrency by market capitalisation hit a low of $60m in May.
Although the value increased to $69m in June, this still compared badly with the $270m worth of bitcoin commercial transactions seen a year ago.
Much of the decline occurred during the period of heightened volatility that saw bitcoin hit a peak of near $20,000 in December, then sink rapidly below $6,000 over the next six months.
Indeed, as speculative activity by crypto investors increased, the decline in usage for payments decreased, the Chainalysis research found.
“When the price is going up so rapidly last year, in one day you could lose $1,000 if you spent it,” Kim Grauer, senior economist at Chainalysis, told Bloomberg.
Volatility was not the only barrier to bitcoin-fuelled transactions, however. Cost also appeared to play its part as the net cost of a bitcoin transaction outpaced that of credit cards or rivals such as PayPal, prompting some payment companies who had, hitherto, accepted the digital currency as payment to stop supporting its usage.