Tom Wilson -
The use of bitcoin for commercial payments has dropped dramatically this year, even as the original digital coin starts to fulfil one of the basic features of any payment currency: stability.
The value of bitcoins handled by major payment processors shrivelled nearly 80 per cent in the year to September, data from blockchain researcher Chainalysis shows. That suggests the cryptocurrency is struggling to mature from speculative asset to a serious alternative to state-issued money.
Months of relative calm in bitcoin prices after the wild swings of last winter had fuelled hopes it would become widely used for payments, its intended purpose.
But its collapse in use as a payment currency has instead left big finance and crypto insiders eyeing better technological infrastructure to help bitcoin take off as a way to pay.
“There would have to be a stability requirement if it is to become another form of money,” said Joni Teves, a strategist at UBS in London. “But one thing that would take bitcoin into the mainstream is scalability — is it able to process the value or volume of transactions that money tends to do?”
The blockchain technology, where all bitcoin activity is recorded and validated, can only process a fraction of the transactions per second that major credit card companies can. That renders its mass use impractical. Bitcoin still endures torrid swings in price, as this week’s 30 per cent plunge shows. For a spell last month, though, the cryptocurrency was more stable than US stocks.
Despite that growing stability, the value of bitcoin payments collapsed to $96 million in September from a December high of $427 million, the data from Chainalysis shows.
The firm surveyed 17 bitcoin payments processors, including Atlanta-based BitPay, one of the biggest. Most merchants that accept bitcoin do not do so directly, instead using intermediaries like BitPay to covert bitcoin to fiat currencies.
Comprehensive data on bitcoin used for payments is patchy, as trades with other currencies tend to be included along with its use for commercial payments. That said, separate figures for individual payments processors reflect the downward trend. At Vancouver-based Coinpayments, for example, incoming and outgoing transactions slumped by more than half between January and October, according to blockchain analysis site OXT. Coinpayments did not respond to requests for comment. — Reuters
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