Bitcoin's return to volatility over the past few days is not the only problem that digital currency faces when it tries to establish a foothold in the payments world. Apparently, its use in actual payment transactions is rapidly reducing, according to the numbers compiled by Chainalysis Inc., a New York City based company whose software measures the volume of cryptocurrency in merchant services.
After holding steady at or above the $ 6,000 level for more than a year, Bitcoin fainted in the middle of this month and trading at mid-morning in the morning at $ 3,684, according to Coindesk, an online news service that follows the cryptocurrencies. In fact, after reaching a peak in December at a $ 20,000 height, Bitcoin eventually settled at the start of September on a track that saw little variation until recently.
The volatility of the currency can damage the merchant's volume as both buyers and sellers must take into account changes in value between the time a customer begins a transaction and when the transaction resolves and resolves. But the volume of Bitcoin traders has been declining for the whole year, from $ 344.2 million in January to just $ 95.6 million in September, the last month for which Chainalysis has figures. The company says it collects its data from 17 companies that provide merchant services for Bitcoin and other digital currencies.
The drop in volume could come from the Bitcoin slide from its five-digit dollar value at the start of this year as well as from any traders' aversion to the cryptocurrency acceptance. But Kim Grauer, senior economist at Chainalysis, warns against drawing firm conclusions. "It's definitely a blurred topic," says Grauer News on digital transactions. "We're not sure what a lot of this activity is doing."
The market for acceptance of Bitcoin traders is still in its infancy, bringing Grauer to underline several factors that could underlie the decrease in the volume of traders. "It's hard to know if people are tired, or waiting, or hodling," he says. The term "hodling" comes from a printing error to "contain" what happened on social media and refers to the decision to sit on Bitcoin as a resource rather than spend it.
Also, for a while it might be quite expensive to spend Bitcoin. The average cost of network user transactions has calmed this year after peaking in December at $ 31, according to Bitinfocharts.com. This development, together with a congested network and long transaction times, has led suppliers like Band stop supporting Bitcoin. However, since Monday, the commission has remained at 28 cents and has remained steadily well below the $ 1 level most of the time since March.
All in all, says Grauer, the story behind the volume trends of Bitcoin traders "is a little more nuanced" than a simple conclusion that the digital currency is failing as a medium of exchange. "The infrastructure," he says, "is under construction, 2017 was a year of buzz, 2018 is a year of construction."