Key Points
- Bitcoin’s transaction rate stagnates, reflecting levels from 13 years ago, according to CryptoQuant CEO Ki Young Ju.
- Bitcoin is increasingly being treated as a store of value or “digital gold” rather than a medium for daily transactions.
CryptoQuant CEO Ki Young Ju has observed stagnation in Bitcoin‘s velocity, reflecting levels seen 13 years ago.
Despite the broad acceptance and approval of Bitcoin spot exchange-traded funds, the transaction rate of the blockchain network is reminiscent of its early stages.
Bitcoin’s Evolving Role
In a post on a social media platform, Ju suggested that Bitcoin’s role is shifting towards being a “digital gold” rather than a medium for daily transactions. This significant shift indicates that while Bitcoin has seen widespread adoption, its use as a daily transaction currency has not lived up to initial expectations.
According to Ju, both institutions and individuals are increasingly treating Bitcoin as a store of value, holding onto it rather than spending it frequently.
Bitcoin velocity, which measures how often Bitcoin is used in transactions or how frequently it moves between wallets over a set period, mirrors that of 2011. Despite several spikes in transaction activity over the years, the current levels suggest a long-term trend of stagnation.
Bitcoin’s Limitations as a Payment Method
Nick Tomaino, a former Coinbase employee, also stated that Bitcoin is not suitable for payments. He noted that while Bitcoin was initially thought to revolutionize the payment landscape, it quickly became clear that there was no long-term business case for Bitcoin payments.
Zach Rynes, a liaison for the Chainlink community, highlighted the technical difficulties that Bitcoin faces as a payment method. He noted that Bitcoin lacks the programmability that platforms like Ethereum offer.
Rynes pointed out that Bitcoin’s base layer is not capable of handling payments from a technical perspective. While the Lightning Network, which offers quicker transactions, has shown potential, it comes with its own set of challenges, particularly regarding liquidity and scalability. These issues further complicate the use of Bitcoin for everyday transactions.
Rynes’ analysis underscores the complexities involved in using Bitcoin as a payment method and highlights the need for practical solutions that address merchant requirements while maintaining the principles of decentralization.
Some Bitcoin enthusiasts argue that one of the reasons why Bitcoin is not widely used is because the Internal Revenue Service considers every spend transaction a taxable event. Rynes clarified that his analysis was based on Bitcoin’s limitations as a payment method, not on why cryptocurrencies aren’t popular payment gateways.
