Bitcoin might someday become a currency that people commonly use to buy retail goods and services, but it has hit a snag. Though the number of merchants accepting the cryptocurrency—including big names like Microsoft, Expedia, and Overstock.com—grew fourfold to 100,000 last year, it appears there has been very little if any increase in retail purchases using Bitcoin.
The price of a bitcoin may be recovering after last month’s plunge (See “Price Slump Tests Bitcoin’s Self-Correcting Economics”), while bitcoin wallets are becoming more common and daily exchanges of bitcoins are steadily increasing. But the currency is still used primarily for online gambling, purchases of illicit goods and services, and speculation, according to several people who closely track its use.
The design of Bitcoin and the blockchain, its public transaction ledger, make it challenging to distinguish specific types of transactions. Nonetheless, researchers from the U.S. Federal Reserve determined in a recent analysis that the currency is “still barely used for payments for goods and services.” Last week, nearly 200,000 bitcoins changed hands each day, on average. But fewer than 5,000 bitcoins per day (worth roughly $1.2 million) are being used for retail transactions, according to estimates by Tim Swanson, head of business development at Melotic, a Hong Kong-based cryptocurrency technology company. After some growth in 2013, retail volume in 2014 was mostly flat, says Swanson.
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