Editor’s note: This article was first published in July 2017, and the news it reports was current then, including Bitcoin’s 250% price rise and the number of top-500 online retailers accepting it. The cryptocurrency market and merchant acceptance have changed a great deal since.
A few days ago I looked at Bitcoin and cryptocurrencies in general, trying to fill in some of the variables to place Bitcoin in the future, and I was able to confirm that we are dealing with a mere speculative product, not a “currency” or means of payment.
The price of Bitcoin has risen 250% since last year, but according to data from Morgan Stanley, acceptance of cryptocurrencies as a means of payment has fallen among the main retailers.
According to the report, published this Wednesday by Morgan Stanley’s team of analysts led by James E. Faucette, acceptance of Bitcoin is virtually zero and keeps shrinking, despite its impressive rise in value.
According to Morgan Stanley, last year Bitcoin was accepted as a means of payment by five of the top 500 online retailers. Today, only three of the top 500 retailers accept Bitcoin as a means of payment.
This gap between the almost non-existent acceptance by online shops and Bitcoin’s rapid recognition and dizzying valuation is surprising and genuinely worrying.
The investment bank pointed to 3 reasons why acceptance of Bitcoin may be falling:
The first reason has to do with Bitcoin’s rise in value. Most cryptocurrency owners don’t want to pay with them, because they don’t want to part with them in the belief that Bitcoin will keep going up in price, so they prefer to hold on to their cryptocurrencies.
This point underlines the bank’s view that Bitcoin works mainly as an investment or speculation vehicle rather than as a fiat currency that can be spent on goods and services.
The second reason would be Bitcoin’s scalability problems, which have made transactions slow and expensive. Morgan Stanley believes that retailers find Bitcoin unattractive as a means of payment.
And finally, Bitcoin holders have been more focused on persuading other people to buy Bitcoin than on pushing retailers to accept Bitcoin as a means of payment.
In other words, the Bitcoin ecosystem has focused more on speculating on its value than on the “groundwork”, which would be giving Bitcoin a real use if they want it to be a serious currency rather than a mere speculative product, one where new buyers are needed to push up the value of bitcoins and deliver big gains to current Bitcoin holders.
Morgan Stanley does point out that, although the main retailers are not interested in accepting Bitcoin as a means of payment, they are very interested in the technology behind cryptocurrencies, a technology they find very attractive for use in other areas.
See also: The 4 phases of a financial bubble
Featured image: Ajay Suresh from New York, NY, USA, CC BY 2.0, via Wikimedia Commons.
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