According to a new report from Chainalysis, Bitcoin isn’t as popular of an online payment method as it was a year ago. Since the late-2017 price rally that saw the top-ranked cryptocurrency come within touching distance of $20,000, fewer people seem incentivized to spend it on retail purchases. Such is the decline of BTC’s use in online commerce that it has dropped by almost 85 percent. Volatility, transaction fees, and the irreversibility of BTC transactions are among some of the reasons for this decline.
Online Merchants Report Declining Bitcoin Usage
According to research conducted by Chainalysis for Bloomberg News, 17 of the largest crypto merchant services processed $411 million worth of payments in September 2017 alone. However, this figure has dipped dramatically since then, falling to $60 million in May 2018.
June 2018 saw a mini resurgence: BitPay, GoCoin, and Coinify together processed $69 million worth of BTC payments. However, this figure pales in comparison to the $270 million cleared in that same month in 2017.
Interestingly, and perhaps coincidentally, the decline began right around the time when Bitcoin embarked on its spectacular bull run in late 2017. It makes sense to imagine that BTC holders were reluctant to spend what would at the time have been valuable cryptocurrency. Commenting on the matter, Kim Grauer, a senior economist at Chainalysis said:
“When the price is going up so rapidly last year, in one day, you could lose $1,000 if you spent it.”
The decline in BTC’s use in e-commerce will come as a source of concern to Bitcoin enthusiasts who assert that BTC’s adoption in online payment systems is a testament to its candidacy as a global currency standard. In an email to Bloomberg, Kyle Samani, the managing partner at Multicoin Capital said:
“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.”
Bitcoin is Unsuitable for Micro-Transactions
The consensus among critics of BTC’s use in e-commerce is that it is unsuitable for microtransactions. According to Nicholas Weaver, a senior researcher at the International Computer Science Institute:
“It’s not actually usable … the net cost of a Bitcoin transaction is far more than a credit card transaction.”
One area in which the top-ranked cryptocurrency is becoming increasingly popular, however, is in the payment of freelancers and service vendors. Bitcoin reportedly offers cheaper and faster transactions for such payments. Speaking on this emerging trend, BitPay CCO Sonny Singh said:
“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.”
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