Will Shopify’s new cryptocurrency partnership broaden its moat?

Shopify‘S (NYSE: STORE) the platform allows its merchants to accept payments in bitcoin, Litecoin, Ethereum and over 300 other types of cryptocurrencies. It recently expanded that reach by partnering with cryptocurrency payment processor CoinPayments, which helps merchants process 1,800 types of cryptocurrencies.

Shopify says the partnership “will make cryptocurrency transactions easier and more accessible by reducing transaction fees.” CoinPayments CEO Jason Butcher said the partnership will offer a “seamless process for anyone wishing to do business using cryptocurrencies.”

CoinPayments has processed over $ 5 billion in cryptocurrency payments since its founding in 2013 and provides customers with various APIs, shopping cart plug-ins, and digital wallets. Shopify’s cryptocurrency expansion isn’t surprising, but will this new partnership broaden its moat?

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How many people actually use cryptocurrencies for payments?

Cryptocurrencies such as bitcoin have gained a lot of attention among speculators in recent years. However, the wide swings in prices – which have gone from around $ 500 to $ 19,000 per bitcoin over the past four years – have made them difficult to accept as traditional payments.

Last year, a survey by the Foundation for Interwallet Operability (FIO) found that only 30% of cryptocurrency owners actually used the coins for payments. The vast majority held the coins as investments. A more recent survey conducted by the Economist Intelligence Unit and the Crypto.com digital payments platform found that only 34% of cryptocurrency users were primarily using digital currencies for online payments.

Crypto Radar recently said that 6.2% of Americans owned bitcoin and 7.3% plan to buy some in the future. Yet the vast majority (64.8%) did not own bitcoin and had no plans to buy coins in the future. Another 21.8% had not even heard of bitcoin.

These percentages indicate that cryptocurrency payments are still not popular with traditional buyers. However, many large companies, including Microsoft, AT&T, is Expedia – already accepts bitcoin payments, although it is unclear how many customers actually choose these options.

Another part of its cryptocurrency expansion

Shopify also recently joined Facebook (NASDAQ: FB)-led Libra Association, which wants to serve sub-banks markets with its Libra cryptocurrency. That decision was surprising, since Libra had already lost many of its core members after regulators opposed its development.

Image source: Getty Images.

However, Libra is being developed as a “stablecoin” which is locked to fiat currencies rather than mining algorithms. This stability could make Libra a more viable payment option than bitcoin and other volatile cryptocurrencies, and linking them to Facebook’s Calibra digital wallet, Messenger and WhatsApp could rapidly expand its reach.

CoinPayments also processes payments in other major stablecoins such as TrueUSD, USD Coin, and Gemini Dollar (GUSD). These currencies may be more attractive to traders and buyers, who can sleep more easily knowing that the value of their payments won’t plummet or skyrocket overnight.

Shopify’s partnerships with Libra Association and CoinPayments could steer its merchants from bitcoin to less volatile cryptocurrencies. This process may be glacial and won’t move the needle anytime soon, but it could improve its broader platform, which already serves over a million companies in more than 175 countries.

Shopify’s cryptocurrency partnerships are also expected to widen its moat Adobe‘S (NASDAQ: ADBE) Magento, which recently partnered with cryptocurrency payments platform Utrust to deliver its crypto transactions to over 250,000 merchants. Magento is arguably Shopify’s toughest competitor as it is tightly integrated into Adobe’s other cloud-based analytics, marketing, and advertising tools.

A smart long-term bet on a speculative market

The cryptocurrency market remains a niche market, but it could still grow from $ 1.03 billion to $ 1.4 billion between 2019 and 2024, according to Markets and Markets. Shopify probably doesn’t expect cryptocurrency payments to overtake traditional payment methods anytime soon, but it doesn’t want to be left behind a crucial technology curve either. If major cryptocurrencies like bitcoin stabilize and stablecoins gain ground, Shopify’s recent partnerships could widen its moat against Adobe and other rivals as they plant the seeds for future growth.