Can Bitcoin Become Major Means of Payment During Global Crisis?

UTC by Natallia Maksimenko · 4 min read
Can Bitcoin Become Major Means of Payment During Global Crisis?
Cryptoprocessing.com

Many in the crypto space hope that the recession following the COVID-19 pandemic will provide the necessary push towards mass adoption. Does this mean that soon we’ll all be paying in Bitcoin? The analysts at Cryptoprocessing.com are not so sure.

For crypto evangelists, the coronavirus emergency is the perfect storm: it’s as if various forces came together to push people away from fiat money and towards crypto. Quantitative easing can indeed cause inflation, and many countries’ currencies will depreciate like it already happened to the Turkish lira. Bank deposit rates will hit zero or even turn negative. Some countries can even default on their debts, causing a widespread collapse of financial institutions, investment funds, etc. In these circumstances, crypto does stand out as a dynamic and bullish market.

However, we have to distinguish investments in crypto and using crypto as money – that is, to pay for goods and services. In order for crypto to replace fiat, it has to play both roles. And while the advantages of cryptocurrency as an investment instrument are obvious, it’s taking users more time to start to view it as a normal means of payment, just like a bank card or PayPal.

The analysts at Cryptoprocessing.com – one of the world’s largest crypto payment providers – confirm: while there is a constant increase in payment activity, it is not explosive.

Max Krupyshev, CEO of Cryptoprocessing.com, comments:

“In some cases, the growth is indirectly caused by the coronavirus. The iGaming industry is a good example. Now that offline gambling and betting are impossible, people are turning to online casinos and quickly find out that crypto is the best means of payment on iGaming sites. In some regions they can’t pay with a card because their bank blocks the transaction, but they can pay in BTC, ETH, USDT and so on. The lockdown causes an influx of gamers, and that stimulates crypto payments. But it’s not because users suddenly don’t want to use fiat money anymore: they are just making a rational choice.”

Therefore, people will switch to paying in crypto when they see that it’s easier, faster or cheaper than in fiat. However, the switch will be a result of an analysis and choice, not of an irrational hatred of banks or lack of trust in the government.

Which Crypto Will Become the No.1 Payment Coin?

Most of the transactions processed by Cryptoprocessing.com‘s are in Bitcoin. Will it remain this way?

There are 3 problems with using BTC for payments: time, processing fees, and opportunity costs. On the one hand, a BTC transfer takes up to an hour to process. Long-term crypto holders are accustomed to this, but it’s unacceptable for fiat users. On the other hand, BTC transaction fees can change suddenly, even reaching $3-4, as it happened after the halving.

At the same time, coins like Stellar and Ripple’s XRP feature processing times below 5 seconds and tiny fees. However, it’s the third factor – opportunity costs – that can prove decisive in the near future.

Opportunity cost means the potential gains you lose when you choose one of several alternatives. When you pay with BTC, your opportunity cost is the profit you could gain by investing it instead.

Max Krypushev continues:

“On Cryptoprocessing.com, we’ve implemented instant payments in Bitcoin and Ethereum, so that our users don’t have to wait for blockchain confirmations. It’s as fast as paying with a card. The real question is, why should one spend Bitcoins that might appreciate by 30-40% in one year when you can spend other coins, which aren’t as likely to appreciate? Bitcoin’s dominance in payments is due to people’s habit of using it. But as the price starts to grow again after the current pullback following the halving, I expect payment flows to shift towards smaller coins, like DOGE, TRX, XLM and XRP.”

What about stablecoins? Can Tether or USD Coin gain dominance as a means of payment? Certainly – but only in certain industries. For instance, USDC terms of use forbid paying for any gambling activities in USDC. Since iGaming is the primary market for crypto payments, this limitation can become a serious problem for USD Coin.

To sum up: in the coming months and even years, a large percentage of users will invest in crypto rather than use it to pay for things online, so one shouldn’t expect a crypto payment revolution. Those who do pay in cryptocurrency will probably choose coins with low opportunity costs.

The coronavirus crisis will surely get more people interested in cryptocurrencies, though it’s impossible to say which coin will gain dominance as a means of payment in a few years. However, it probably won’t be Bitcoin.

Altcoin News, Bitcoin News, Cryptocurrency news, News
Natallia Maksimenko
Author Natallia Maksimenko

Having deep expertise in intercultural communications, Natallia is fond of foreign languages and cultures. She strongly believes that people should continually develop to stay on track, that's why she permanently widens her knowledge in various spheres. Currently, Natallia is fully immersed in crypto, blockchain and financial techs.

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