Bitcoin’s use as a medium of exchange has cratered over the last year, dropping from a high of $411 million in transactions last September to a “scant” $60 million in May across the largest 17 crypto merchant-processing services, according to research conducted for Bloomberg by firm Chainalysis.
While the amount merchant services such as BitPay, Coinify and GoCoin received increased slightly in June to $69 million, it was still a far cry from the $270 million received a year ago, Chainalysis found. –Bloomberg
Volatility, meanwhile, has moderated:
While cryptocurrency advocates have long suggested that Bitcoin or other virtual currencies will someday replace fiat currency as a medium of exchange, the historically volatile cost of crypto transactions, the convenience of traditional payment methods and spikes in Bitcoin volatility have hampered its use.
“It’s not actually usable,” Nicholas Weaver, a senior researcher at the International Computer Science Institute, said in an email. Often, he said, “the net cost of a Bitcoin transaction is far more than a credit card transaction.” And Bitcoin-based transactions can’t be reversed, an issue when a merchant or a consumer comes up against fraud. –Bloomberg
Unsurprisingly, Bitcoin’s popularity as a means of payment coincided with its record high of nearly $20,000 in December – prompting stupid people to sell all sorts of assets such as houses and cars in cryptocurrencies. In December, Craigslist began offering sellers the option of accepting cryptocurrency – adding to a growing number of companies adopting cryptocurrency options for their customers, including online gaming platform Steam, Overstock.com, Tesla, Newegg, Microsoft, and Virgin Galactic.
And in January, Twitter co-founder Jack Dorsey’s credit card processing company, Square, integrated support for the purchase and sale of bitcoins (though not the ability to accept it for transactions) – a move which stirred up controversy and was a “pretty contentious move within the company,” said Dorsey.
Dorsey’s move came as payment service Stripe stopped supporting bitcoin for transactions as usage declined and volatility increased. Travel company Expedia dumped cryptocurrency as well in what some investors see as a troubling sign.
“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,” Kyle Samani, managing partner at Austin, Texas-based hedge fund Multicoin Capital, said in a email to Bloomberg . “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.”
Meanwhile, the way people use cryptocurrencies to pay for things is changing;
The way Bitcoin is being utilized is changing as well. Because the fees to process a transaction in Bitcoin can be steep and varied — they peaked at $54 in December, but are down to less than $1 today — not many people are using the coins for small transactions, like buying a cup of coffee. They are spending the virtual currency more to pay vendors like freelancers located overseas: For those cases, using Bitcoin can be cheaper and faster than using traditional financial services. –Bloomberg
“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,” says Sonny Singh, chief commercial officer at processor BitPay – which has seen a 500x increase in crypto companies paying their bills over last year.
It’s not all cratering, however. Overstock.com for example reports a two-fold increase in crypto-based sales this year vs. 2017, with the top items bought using digital currency being living room furniture, bedroom furniture and laptops.
That said, many are holding Bitcoin for long-term speculation and don’t intend on using it to pay for goods and services at present.
“I assume many people are like me, where you won’t be doing your everyday transactions in it,” said longtime advocate Graham Tonkin – chief growth officer at crypto finance research firm Mosaic. “I don’t believe [it] fits the characteristics of money very well.”
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