Data provided by New York-based blockchain research firm Chainlysis has shown that in the first four months of this year, only 1.3% of economic transactions on the Bitcoin blockchain came from merchants, suggesting users are holding onto their coins.
According to Bloomberg, most users aren’t looking to use their BTC as the price of the flagship cryptocurrency may keep on rising, and as such they could miss out on potential gains. This, even though companies like U.S. mobile carrier AT&T are now letting customers pay in crypto.
The news outlet notes that while bitcoin needs to be an attractive payments alternative to attract new users, it also has a culture of ‘hodlers’ that advocate it’s a better store of value than gold and shouldn’t be spent on regular day-to-day transactions. Kim Grauer, a senior economist at Chainalysis, stated:
Bitcoin economic activity continues to be dominated by exchange trading. This suggests Bitcoin’s top use case remains speculative, and the mainstream use of Bitcoin for everyday purchases is not yet a reality.
Chainalysis tracks transactions related to service providers like BitPay, which is the payment services provider for AT&T and various other firms accepting cryptocurrency payments. It reportedly processed $1 billion in both 2017 and 2018.
When a merchant accepts cryptocurrencies through BitPay, it accepts cryptocurrencies on behalf of the business, and gives it the option to receive in cryptocurrency, fiat, or a split. The business can choose to take 100% of the payment in fiat currency, minus a small fee from BitPay.
Bitcoin’s price has more than doubled since the end of last year, when it hit a low of $3,200. In May of this year it tested the $9,000 mark before correcting, and it’s currently trading at $8,700 and rising.
Sonny Singh, BitPay’s chief commercial officer, was quoted as saying:
We are still tracking a little up from last year. The consumers in America generally spend more when the price of Bitcoin goes up. They’ve gone the double, they want to sell some.
Per Bloomberg, Chainalysis’ data shows merchant activity dropped from its peak in late 2017, when most cryptocurrencies were at their all-time highs. At the time, merchant services reportedly accounted for 1.5% of the total Bitcoin activity, and dropped to 0.9% during last year’s bear market.
While merchant-related transactions make up for a small portion of the Bitcoin network’s activity, transactions related to exchange accounted for 89.7% of it in the first four months of this year, down from 91.9% last year.
Darknet-related activity, as well as peer-to-peer bitcoin transactions, have also been on the rise. Efforts to ramp up merchant activity, as Bloomberg notes, have been ongoing, with several browser extensions letting users pay for goods and services using BTC. These include Moon, which lets them use the Lightning Network.