The data revealed that Bitcoin’s transaction velocity today mirrors that of 2011. Despite several spikes in transaction activity over the years, the current levels suggest a long-term trend of stagnation.
Despite a massive appeal and approval of spot Bitcoin exchange-traded funds, the blockchain network’s transaction rate harks back to what it was during its early stages. CryptoQuant CEO Ki Young Ju noted that the BTC velocity has stagnated, echoing the levels of 13 years ago.
In a post on social media platform X, Ju suggested that Bitcoin’s role has evolved more into that of “digital gold” rather than a medium for everyday transactions. This shift is significant, indicating that while Bitcoin has been adopted by many, its use as a daily transaction currency hasn’t met the initial high expectations.
According to the CryptoQuant executive, institutions and individuals are increasingly treating Bitcoin as a store of value, holding onto it rather than spending it frequently.
“Despite Satoshi’s vision of “P2P Electronic Cash”, Bitcoin is primarily used as “Digital Gold”, with institutions holding it without frequent transactions,” Ju said.
Bitcoin velocity is a way to see how often BTC is used in transactions. It measures how frequently BTC moves between wallets over a set period. The data revealed that Bitcoin’s transaction velocity today mirrors that of 2011. Despite several spikes in transaction activity over the years, the current levels suggest a long-term trend of stagnation. It is clear that the digital asset has limited practical use as an everyday currency.
Bitcoin Is Not Suitable for Payments
Nick Tomaino, who once worked at Coinbase, also asserted that Bitcoin is not good for payments via a post on X. During Coinbase’s early days, it was that BTC would revolutionize the payment landscape, noted Tomaino while adding:
“We onboarded some big merchants like Overstock to accept BTC, which was good for credibility, but it became clear quickly there wasn’t a 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 said that BTC lacks the programmability that platforms like Ethereum offer.
Rynes noted that the Bitcoin baselayer “simply isn’t capable of this [payments] from a technical perspective, maybe one day, but today it is not.” The Lightning Network, which boasts quicker transactions, has shown potential but comes with its own set of challenges, particularly regarding liquidity and scalability. These issues further complicate the use of BTC for everyday transactions, said Rynes.
Rynes’ analysis underscores the complexities involved in using Bitcoin as a payment method. It also highlights the need for practical solutions that address merchant requirements while upholding the principles of decentralization.
On the other hand, BTC enthusiasts stated their case, adding that one of the reasons why BTC is not used by people is because the Internal Revenue Service “deems every spend transaction a taxable event”. Rynes noted that his discussion and analysis were based on the fact that BTC is not good as a payment method and not why cryptocurrencies aren’t popular payment gateways.
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