Bitcoin [BTC]’s merchant use has dropped by 85%, says Chainalysis study

A recent survey conducted by Chainalysis Inc. shows that Bitcoin [BTC]’s use by merchants and in commercial use case scenarios is falling. The survey, which was commissioned by Bloomberg, shows that merchant usage peaked at $411 million in September of last year, with lows of about $60 million seen in May. This represents an 85% decrease in the usage of Bitcoin as a ‘currency’.

Bitcoin merchant usage over 3 years | Source: Bloomberg

Bitcoin merchant usage over 3 years | Source: Bloomberg

This was calculated by payments received through services such as BitPay, Coinify, and GoCoin, which reportedly reached around $69 million in June. The decrease was quoted as being due to Bitcoin “losing its appeal” as a currency and as a tool to buy goods and services. In an email to Bloomberg, Nicholas Weaver, a senior researcher at the International Computer Science Institute, stated:

“It’s not actually usable. Often the net cost of a Bitcoin transaction is far more than a credit card transaction.”

The use-case for the coin has instead moved more into speculative investing, the report states. Moreover, the volatile movement of the coin’s price is holding many back from using them for transactions. Kim Grauer, the senior economist at Chainalysis, stated:

“When the price is going up so rapidly last year, in one day you could lose $1,000 if you spent it.”

The transaction fees for the coin are also very high due to their shifting nature. At the point in time where transactions increased, transaction fees also increased, to highs of above $50 for a transaction in December. Even as this decreases the incentive to be used in smaller purchases, such as buying a coffee, there are those that have discovered alternate use-cases for the coin. Kyle Samani, the Managing Partner at Multicoin Capital, said in an email to Bloomberg:

“Most people who are not Bitcoin core maximalists argue that yes, you need people to use these things as means of payment to become money. Or as my co-founder Tushar likes to say, don’t think of money as a noun, but rather as an adjective. The more something is used as money, the more ‘moneyness’ it has.”

This is represented in use-cases such as paying freelancers and online vendors, in which using Bitcoin is cheaper than using traditional money transfer techniques. Websites such as Overstock.com allow users to buy household items such as furniture and laptops using Bitcoin and have reported a two-fold increase in sales made with cryptocurrency. Moreover, companies are also paying vendors in Bitcoin, says CCO of BitPay, Sonny Singh. He stated:

“In the last six months we’ve seen a large uptick in crypto companies paying their vendors in Bitcoin, including law firms, hosting companies, accounting firms, landlords and software vendors.”

He added that BitPay is seeing an increase by an order of 5 in companies paying their bills in cryptocurrencies. Finally, the research found that Bitcoin is used after liquidation to fiat to pay for goods and services. This includes individuals such as the Chief Growth Officer at Mosaic, Graham Tonkin, who sells Bitcoin to cover his credit card bills. He stated:

“I assume many people are like me, where you won’t be doing your everyday transactions in it. I don’t believe [it] fits the characteristics of money very well.”

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