Bitcoin has experienced a bear market since the end of the last year. However, it does not seem that the issues finished here. According to a report from Chainalysis, the popular virtual currency is struggling to become a replacement for fiat currencies.
Chainalysis is a blockchain and cryptocurrency analytics startup that has been making researchers on the virtual currency market. According to it, since January 2018, to September, the USD value of Bitcoin transactions processed by the most important payment processors in the market has fallen to unexpected levels. This is something that shows that Bitcoin is failing as a payment method around the world.
Since the beginning of the current year, the USD value processed in Bitcoin by these payment firms has been reduced by 80%. After reaching all-time highs at the end of 2017, Bitcoin lost around 70% of its value, and there are some experts that believe that it can even drop further.
In January 2018, $427 million dollars in BTC was transacted for retail payments. This number is currently $96 million dollars. This collapse is surprising in some way because during the last few months Bitcoin operated relatively stable compared to other assets.
Joni Teves, a strategist at UBS, commented about this issue:
“There would have to be a stability requirement if it is to become another form of money… 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?”
Bitcoin can process a small number of transactions per second (TPS) compared to other credit card and financial companies. That means that it is yet impractical to use Bitcoin as a means of payment. However, it can be a good way to store value.
Chainalyst surveyed 17 different Bitcoin payments processors such as BitPay. In order to pay with BTC some merchants used payment processors that allow the client to pay using BTC and the merchant to receive fiat currency on his bank account.
In order to solve the issue related to its scalability, developers behind Bitcoin are working so as to release the so-called Lightning Network (LN). The LN is a second layer scaling solution for Bitcoin that would allow it to process millions of transactions per second for just a few Satoshis.
Although it is in its infancy, the LN would help make Bitcoin payments faster and cheaper than what they currently are. Perhaps, the solution is in the current Bitcoin blockchain that is not allowing users to feel they are using something fast and cheap.
Clearly, for bigger transactions, Bitcoin remains a very good option compared to credit cards. Millions of dollars can be sent in just one Bitcoin transaction for a few cents compared to other systems like SWIFT. Moreover, the transaction takes place in just a few minutes compared to days or hours that could take a normal financial transaction using the SWIFT system.