It seems, like the times when every financial magnet called Bitcoin a “bubble” or a “fraud” have passed and even most famous crypto opponents, like JPMorgan Chase, have changed their anger toward crypto to mercy. Different online retail companies, including Digitec Galaxus, and telecom giants, like AT&T started accepting Bitcoin as a payment. Now we already have Bitcoin ATMs all around the world, which hints that Bitcoin has finally found its niche among traditional payment giants like PayPal, Visa and Master Card. How the most popular crypto managed to achieve that?
July 26, 2019, | AtoZ Markets - Nowadays the Bitcoin users make roughly 1% of the whole population on the Earth, and out of this number, 2.3 million people use Bitcoin to make payments. Notable, that the number of Bitcoin ATMs increased from 954 in January 2016 to 2,053 by January 2018. According to the recent study of crypto market analysts from Datalight, in 2018 an average Bitcoin transaction volume was 450 times higher than Visa’s average, while the total of $3.4 trillion transferred with Bitcoin in 2018 is 5,8 times higher than such of PayPal. Should we expect Bitcoin to overshadow the traditional payment services?
Bitcoin volatility remains steadily high
It is worth mentioning, that Bitcoin’s capitalization at the end of 2017 increased almost tenfold in just half a year, climbing from $25 Bn to $240 Bn. On the contrary, in 2018, which was quite bearish for crypto assets, many projects lost more than 90% of their capitalization, and Bitcoin lost approximately 80% of its value.
The last year was also, quite difficult for the ICO, which probably might never be able to regain its former popularity and be able to compete with the new crowdfunding activities, such as IEO.
While classic payment systems have shown more than 10% growth, Bitcoin’s price fell sharply. The crypto market has shown higher volatility than traditional market assets in 2018. The Datalight research has confirmed that the average daily volatility of Bitcoin was almost 3 times higher than that of its competition.
Bitcoin surpasses classic payment systems and here is why
The key factor that characterizes the state of a payment network is its activity, which is calculated based on the number of transactions.
In terms of total transaction volume, Bitcoin overtakes PayPal and nears MasterCard. The average transaction volume of Bitcoin ($40000) is 450 times higher than Visa’s. This indicates that Bitcoin’s network is more suitable for larger payments.
Another parameter worth mentioning is a transaction/capitalization indicator that allows examining the network’s activity through the prism of the market evaluation. Notable, that Bitcoin transaction indicator is higher, which let us conclude that the market evaluates Bitcoin higher than it does Visa and Master Card, both of which have values within the 30–35 range.
The transaction fee depends on the transaction volume
It is also important to pay attention to the transaction fee, which also impacts the popularity of any payment system. According to Datalight statistics, it is more reasonable to use Visa and MasterCard, when transferring small amounts of money, below $100.
Notable, that Bitcoin offers the same $0.20 fee (as of the end of 2018) for all transactions, even those worth millions of dollars.
In this case, the fee percentage is lower compared to classic payment systems. Thus, the average transaction volume differs so dramatically as it is more profitable to transfer large sums with a fixed rate rather than a percentage of the transferred sum.
The last indicator, which shows, that Bitcoin is slightly winning its competition with traditional payment systems is the number of data centers or nodes .
In the transactions’ quantity aspect, Bitcoin is ahead of the traditional payment systems. In 2018, the number of Bitcoin nodes remained steady at around 10000 despite its price fall and the increased cost of mining Bitcoin.
A number of accounts/capitalization as a compound indicator is defined by the market. It's one of the main indicators that show how widespread the network is. In the case of Visa and MasterCard, this is the number of cards.
The values of this indicator displayed by Visa and MasterCard are quite close, while Bitcoin’s values are significantly higher due to a low number of accounts. With approximately 25 million accounts in 2018, Bitcoin loses not only to Visa and MasterCard but also to PayPal.
About Bitcoin, Paypal, VISA and Mastercard in a brief
Bitcoin competes with the payment systems, that have been operating for decades, apart from a PayPal, which was introduced in 1998.
Since its foundation, VISA - in 1958, Mastercard - in 1966, both companies have developed their infrastructure to become leaders in the market of financial services. VISA and Mastercard have established their businesses steadily, by gaining trust from the users year over year and region over the region.
Differently, from them, Bitcoin, which appeared in 2009, became available worldwide immediately. Despite the success Bitcoin is said to have made, other cryptocurrencies, including Ethereum or Bitcoin Cash, did not come close to MasterCard or Visa in that regard.
The experts believe that if Bitcoin’s exponential development maintains its pace, in another 10 years, it likely will surpass all competition.
Bitcoin, with all of its imperfections, provides a few benefits, which, the crypto enthusiast believe, traditional payment systems can not offer :
- Bitcoin is still many times faster than the existing wire transfers;
- Bitcoin’s fees are small, so you can transfer millions of dollars for a dozen cents;
- Bitcoin’s payment system is much superior to conventional international payments and wire transfers.
At the moment, the only factor that hinders quick development of Bitcoin’s network is its upscaling problem. However, the Lightning Network will allow Bitcoin to increase its upscaling potential and network bandwidth tenfold.
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