Bitcoin tanked on April 26, dropping more than 5% over the course of the day, reaching just under $38,000.
Which means that as of 5 p.m. Eastern, just 46% of all bitcoin holders were in the black with 12% breaking even, according to IntoTheBlock. Compare that to the start of the business day, when bitcoin was about $40,300 and 63% of bitcoin investors were in the black, and you get a sense of why investing in cryptocurrencies can be rough business.
Look at Ethereum, the No. 2 cryptocurrency, and you’ll see 63% in the black and 6% at par, versus 73% this morning. Now think about a merchant that accepts bitcoin online or at the register, and you see the headwinds that crypto faces as a payments currency.
Those numbers are pretty solid: IntoTheBlock scans all the bitcoins in each wallet addresses — it’s all publicly available on the blockchain, albeit without names attached — looks at the price paid for each bitcoin, averages the price of all bitcoins in that wallet coin, and comes up with a number for each bitcoin owner.
But IntoTheBlock has said that its numbers show over time that much of bitcoin’s price volatility is attributable to short-term holders — the traders, rather than the investors.
That’s worth considering in light of PYMNTS’ newly released U.S. Crypto Consumers study, which showed that for at least part of the preceding 12 months, 23% of all consumers bought crypto — a total of 59.6 million.
That’s about 18 million new crypto owners, in a time frame in which the price of bitcoin went from more than $60,000 down to $29,000, back up to nearly $70,000 and now back below $40,000.
Use is Growing
At the same time, there’s more than a little evidence that consumers who own crypto are using it to buy things.
This month, “The U.S. Crypto Consumer: Cryptocurrency Use in Online and in-Store Purchases,” a study by PYMNTS and BitPay, found that 28% of consumers see crypto as a payments option. That numbers gets substantially higher if you exclude baby boomers and seniors — almost 39% — and without Gen Xers, it goes up to 42%.
Anecdotally, holders of Visa-branded crypto debit cards, which let consumers spend crypto at any merchant in the payments network, spent $1 billion by mid-2021, CNBC reported — and in the last three months of that year, they spent $2.5 billion.
“To us, this signals that consumers see utility in having a Visa card linked to an account at a crypto platform,” Visa Chief Financial Officer Vasant Prabhu said. “There’s value in being able to access that liquidity, to fund purchases and manage expenses, and to do so instantly and seamlessly.”
That’s getting easier all the time as crypto payments processors like BitPay expand their options. CEO Stephen Pair told PYMNTS’ Karen Webster that crypto owners tend to spend when the prices are high and hold it when they are low, with dollar-pegged stablecoins bought when bitcoin and other cryptocurrencies are high being used as a hedge.
“Instead of making their purchase in bitcoin natively, when the price is high, they’ll convert into stablecoins,” Pair said.
“I think in 2022, you’ll see many more people — that next wave of people — getting interested in crypto both from an investment perspective and a ‘let’s try it for a payment’ [perspective],” he added. “There’s going to be many more places with that service — that you’ll be able to spend crypto and do it in an in-person setting, which may make people more comfortable trying it out than perhaps if it’s on a website where they’re not sure if they’re doing it right or wrong.”
Other payments processors are seeing a growing market. Bitcoin payments firm Strike this month announced deals that will allow bitcoin payments on Shopify, with prepaid payments provider Blackhawk Network and at NCR’s point of sale terminals.
And in March, Stripe CEO John Collison announced that the payments processor was once again supporting crypto payments.