Research has highlighted the popularity of bitcoin for large payments, including those across borders. By transaction volume, bitcoin has nearly caught up with Mastercard and may in future overtake the market leader, Visa. In the markets, bitcoin’s sudden surge earlier this week is yet to be explained.
Bitcoin continued to trade above $5,000 on Thursday, near its highest levels since November.
Given the coiling price action and non-existent volatility that had long preceded it, Tuesday’s sudden surge—a $900 increase in less than an hour—had all the hallmarks of being technically driven, meaning a breakout of sorts, though some have pointed the finger at algorithms, and other explanations are linked to a reduction in bitcoin mining rewards.
Of course, holders of bitcoin won’t care why they are better off; they just are. Prices are, though, barely a quarter of those at the market’s peak 16 months ago.
What is highly promising for bitcoin at a fundamental level is data from DataLight showing that the flagship cryptocurrency is now among the leading payment methods for large transactions and is a genuine rival to the likes of Visa, MasterCard and PayPal.
At $3.4 trillion, bitcoin’s total volume for payments and transactions in 2018 was less than Visa and MasterCard’s, which handled $11.2 trillion and $5.9 trillion respectively, but was 6 times larger than PayPal’s, which handled $578 billion. Interestingly, bitcoin’s average transaction size was 462 times that of the market leader—the average bitcoin payment exceeded $41,000, compared with a meager $90 for Visa.
DataLight’s research shows real-world usage for bitcoin that many had suspected was missing—an idea that surely contributed to 2018’s cryptocurrency collapse and to lower-than-expected derivatives volumes.
In 2018, Goldman Sachs wrote in a report that cryptocurrencies “do not fulfill any of the three traditional roles of a currency: they are neither a medium of exchange, nor a unit of measurement, nor a store of value.” On the first of those roles, DataLight’s research offers evidence to the contrary.
Much of bitcoin’s popularity as a payment vehicle comes from the near-zero cost of transferring funds.
“Bitcoin’s fees are so small that you can transfer millions of dollars for a dozen cents,” DataLight writes. “This is the reason many financial organizations find it so attractive.”
On low amounts (less than $100), variable fees between 0.13 and 0.4 percent mean that Visa and Mastercard offer ever-so-slight savings compared with bitcoin payments.
DataLight concludes that bitcoin is “almost certain [to become] the world’s main payment system,” though some technical improvements to the network are needed for that to happen.
“At the moment, the only factor that hinders quick development of bitcoin’s network is its upscaling problem. However, the solution for this problem—the Lightning network—is upcoming. This technology will allow bitcoin to increase its upscaling potential and network bandwidth tenfold.”
With this in mind, much higher bitcoin prices should be expected, DataLight says.
“This is why the bear trend of 2018 will be another dip before the exponential growth and new all-time highs [above $20,000].”