New data published today shows a significant slump in the amount of bitcoin actually used for goods and services in the last year.
The research conducted by Chainalysis for Bloomerg news shows that the amount of money processed by the 17 biggest crypto merchant processors – companies that enable businesses to be paid in crypto such as BitPay and CoinGate – has declined massively since hitting a peak last year:
Reaching an impressive $411 million on the 30th of September 2017, the amount of bitcoin flowing through the processors declined significantly to reach a low of under $60m at the end of May of this year.
The major dip in use coincided neatly with the enormous bull run of the end of 2017 which saw bitcoin prices soar to a record price of $20,000 before crashing substantially in December. With such wild fluctuations in bitcoin price – often varying substantially from minute to minute - the coin unsurprisingly quickly lost its appeal as a practical means of payment for goods and services.
Speculation vs. Real Use
Another important dynamic that accompanied the enormous surge in bitcoin speculation, the report notes, was the soaring cost of bitcoin transaction fees – as shown in this chart from bitinfocharts:
Reaching an almost ridiculous level at $54 in December of last year, Kim Grauer, senior economist at Chainalysis explained to Bloomberg just how unusable it became:
When the price is going up so rapidly last year, in one day you could lose $1,000 if you spent it.
With the price of bitcoin surging in recent weeks likely due to anticipation of several Bitcoin-ETF applications, Ethereum co-founder and crypto-pioneer Vitalik Buterin also drew attention to the tension between price speculation and real-world adoption to his Twitter followers on Monday, arguing that there was “too much emphasis on ETFs:”
I think there's too much emphasis on BTC/ETH/whatever ETFs, and not enough emphasis on making it easier for people to buy $5 to $100 in cryptocurrency via cards at corner stores. The former is better for pumping price, but the latter is much better for actual adoption.— Vitalik Non-giver of Ether (@VitalikButerin) July 29, 2018