Bitcoin plummeted on April 26, dropping more than 5% over the course of the day, reaching just under $38,000.
Which means that as of 5 p.m. EST, only 46% of all bitcoin holders were in the black with 12% breaking even, according to IntoTheBlock. Compare that to the start of the business day, when bitcoin was around $40,300 and 63% of bitcoin investors were in the black, and you’ll see why investing in cryptocurrencies can be a tough business.
Look at Ethereum, the #2 cryptocurrency, and you’ll see 63% in the black and 6% at par, down from 73% this morning. Now think of a merchant who accepts bitcoin online or on the ledger, and you see the headwinds that crypto faces as a payment currency.
These numbers are pretty solid: IntoTheBlock scans all bitcoins in each wallet address – everything is publicly available on the blockchain, but with no names attached – looks at the price paid for each bitcoin, averages the price of all bitcoins in this wallet coin, and offers a number for each bitcoin owner.
But IntoTheBlock said its numbers show over time that much of bitcoin’s price volatility is driven by short-term holders – traders, rather than investors.
This is worth considering in light of the recently published US Crypto Consumers study by PYMNTS, which showed that for at least part of the previous 12 months, 23% of all consumers purchased crypto, or a total of 59.6 million.
That’s about 18 million new crypto owners, in a time frame where bitcoin’s price has gone from over $60,000 to $29,000, climbing back to nearly $70,000 and now below $40,000.
Use is growing
At the same time, there is more than a little evidence that consumers who own crypto are using it to buy things.
This month, “The US Crypto Consumer: Cryptocurrency Use in Online and in-Store Purchases,” a study by PYMNTS and BitPay, found that 28% of consumers consider crypto as a payment option. That figure gets considerably higher if you exclude baby boomers and seniors — almost 39% — and without Gen X, it jumps to 42%.
Anecdotally, holders of Visa-branded crypto debit cards, which allow consumers to spend crypto at any merchant in the payment network, spent $1 billion in mid-2021, CNBC reported — and in the last three months of that year they spent $2.5 billion.
“To us, this indicates that consumers are seeing the value of having a Visa card linked to an account on a crypto platform,” said Vasant Prabhu, chief financial officer of Visa. “It helps to be able to access that cash, fund purchases and manage expenses, and do it instantly and transparently.”
This is getting easier and easier as crypto payment processors like BitPay expand their options. CEO Stephen Pair told Karen Webster of PYMNTS that crypto owners tend to spend when prices are high and hold when they are low, dollar-pegged stablecoins bought when bitcoin and others Cryptocurrencies are high being used as a hedge.
“Instead of buying bitcoin natively, when the price is high, they will convert to stablecoins,” Pair said.
Read more: Bitcoin’s Future as a Payment Tool Is Bright, Says BitPay CEO
“I think in 2022 you’ll see a lot more people – that next wave of people – taking an interest in crypto both from an investment perspective and from a ‘let’s try it for a payout’ [perspective],” he added. “There will be a lot more places with this service – that you can spend crypto and do it in person, which may make people feel more comfortable trying it out than maybe if it’s on a website where they’re not sure if they’re doing it right or wrong.
See also: BitPay CEO: Bitcoin Payments Will Explode in 2022 as Crypto Hits Inflection Point
Other payment processors see a growing market. Payments company Bitcoin Strike announced deals this month that will enable bitcoin payments on Shopify, with prepaid payments provider Blackhawk Network, and at NCR point-of-sale terminals.
Related: Integrate Bitcoin firmly into payments, Strike Partners with NCR, Shopify, Blackhawk
And in March, Stripe CEO John Collison announced that the payment processor was once again supporting crypto payments.
Read more: Stripe Returns to Crypto Payment Processing