A bitcoin ATM in Los Angeles. Image: JeremyWord/Shutterstock
Fewer people are using bitcoin to buy and sell goods and services than you think.
The fever around bitcoin and other cryptocurrencies has died down somewhat since the heady highs of late 2017. Now, research carried out by Chainalysis for Bloomberg shows a general decline in bitcoin transactions.
Bitcoin may not replace traditional money just yet
According to the research, the amount of money in bitcoin that the 17 biggest crypto merchant-processing services managed hit a peak of $411m in September 2017, but has since hit a recent low of just $60m in May of this year.
Services such as BitPay and Coinify did see an increase in the amount received in June ($69m) but it is still a significant drop compared to the $270m received a year ago.
The drop in the use of the cryptocurrency for payments occurred as the spike in speculative investing drove bitcoin prices sky-high in December 2017. While things have calmed down somewhat, customers are still reluctant to use digital coins for normal transactions.
Senior economist at Chainalysis, Kim Grauer, noted that high transaction fees have made buying small items, such as a coffee and cake, with the cryptocurrency far from practical.
Last year, transaction fees hit an all-time high of $37, according to Bitcoinfees.info.
People are either holding what they have, speculating or are spending the virtual currency on bigger transactions. It is increasingly used to pay freelance vendors overseas, as in this case it can be cheaper than old-school financial services.
Is it usable as day-to-day money?
Nicholas Weaver, a senior researcher at the International Computer Science Institute, said that cryptocurrency in general is “not actually usable” as a form of payment. He noted that often, “the net cost of a bitcoin transaction is far more than a credit card transaction”.
For now, it looks like fiat currencies still have the advantage over bitcoin, at least for doing your grocery shopping or other similar small transactions.
