Consumers and businesses are increasingly using digital tokens other than bitcoin to make purchases, according to BitPay Inc., one of the world’s largest crypto payment processors.
According to BitPay data, the percentage of merchants who paid with bitcoin last year dropped to around 65 percent from 92 percent in 2020. In addition, ether payments accounted for 15% of total purchases, stablecoins accounted for 13%, and BitPay’s newly added cryptocurrencies in 2021 – Dogecoin, Shiba Inu and Litecoin – accounted for 3%.
The Zhitong Finance app has noticed that the use of stablecoins is surging, in part because more and more companies are starting to use stablecoins in cross-border payments. Consumers also tend to turn to stablecoins (whose value should remain stable) when cryptocurrency prices drop, which have been falling since early November. Currencies like Dogecoin also made a splash last year, thanks to companies like Tesla. Its CEO Elon Musk has said that Dogecoin can be used to buy the company’s goods.
With bitcoin’s price up 60% in 2021 despite volatility in the fourth quarter of last year, many investors may also choose to hold the world’s largest cryptocurrency rather than spend it.
When investors use cryptocurrencies, many choose to buy luxury items such as jewelry, watches, cars, boats, and even gold, which Bitcoin, touted as digital gold, is expected to replace, according to BitPay. The company’s chief executive, Stephen Pair, said the volume of luxury-related transactions processed by the company surged from 9% in 2020 to 31% last year. . The company’s total payments in 2021 are up 57% year over year.
With an annual transaction volume of $1 billion, BitPay helps companies like Microsoft and AT&T accept cryptocurrency payments.
It also serves as an industry barometer. At least so far, the recent market downturn has not had as much impact on the spending habits of cryptocurrency investors as it did in the winter of 2018, Pair said. While luxury spending took a hit, the overall decline was much smaller, which could be a sign of confidence that the current downturn may be short-lived, or that cryptocurrencies have a broader user base, he said.
“Our business has been up and down to a certain extent with the ups and downs of cryptocurrency prices, and when prices are down, people tend to spend less,” Pair said. “We haven’t experienced such a big drop in volume during this latest pullback. This may just reflect the growing need for companies to use it as a payment tool.”
More and more merchants are now accepting crypto payments. Last year, BitPay started working with VeriFone to accept digital currencies at terminals in different stores.
More and more companies including PayPal are also getting into crypto payments, showing the growth potential of the cryptocurrency payments market.
“PayPal’s entry into this space is great for our business because it’s causing some companies to start thinking about whether they should accept crypto payments,” Pair said.
The company has raised $72 million from the likes of Index Ventures and Founders Fund. Pair said the company doesn’t expect to go public anytime soon, and it won’t raise a new round of financing or sell it, though the company has been discussing an IPO internally.
“We really like our strategic position,” Pair said. “The space is still young. A lot of it has to do with our perception of timing. We’re likely to see very substantial growth over the next few years.”