The dominance of Bitcoin in crypto payments is declining

BitPay, one of the world’s most popular crypto payments processors, revealed that over 2021, Bitcoin’s use at merchants that use its payment services dropped to about 65%, down from 92% in 2020. Ether purchases accounted for 15% of the total, stablecoins were 13%, while Dogecoin, Shiba Inu, and Litecoin, added to BitPay in 2021, accounted for 3%.

BitPay Inc. has seen a shift in the type of digital assets used for purchases over the last year, Time reported.

The alternative coins’ use surged partly as more businesses have begun using stablecoins for cross-border payments. Consumers also tend to move to stablecoins when crypto prices drop, and they’ve been falling since early November. Coins like Doge also made a splash last year, thanks to fans like Tesla CEO Elon Musk, who said Friday the token can be used to buy the company’s merchandise.

Despite the fourth-quarter volatility of Bitcoin’s price rising 60% last year, many investors may also have chosen to hold onto the world’s biggest cryptocurrency instead of spending it.

According to BitPay, when customers did spend their crypto, many bought luxury goods like jewelry and watches, cars, boats, and even gold, which Bitcoin — often called a “digital gold” — is supposed to replace. According to CEO Stephen Pair, BitPay’s transaction volumes related to luxury goods surged 31% last year from 9% in 2020. The Atlanta-based private company’s overall 2021 payment volumes rose 57% year over year.

Founded in 2011 when few companies accepted digital coins, BitPay now processes an average of about 66,000 transactions per month, with its $1 billion in annual transaction volume.

It can also serve as an industry barometer. At least so far, the recent downturn hasn’t affected crypto investors’ spending habits as much as in the crypto winter of 2018, Pair said. While luxury spending has been hit, the overall declines have been much smaller, he said — perhaps a sign of confidence that the current downturn could be short-lived or that crypto has a much broader base of users.

“Our business ebbs and flows to some degree with the price; when the price goes down, people tend to spend less,” Pair said. “We have not experienced as much of a decline in volume with this recent pullback. It’s probably just a reflection of more and more companies that need to use this as a tool to conduct payments.”

Aside BitPay, a growing list of companies, including PayPal, are also stepping into crypto payments, showing the payments market’s growth potential.

“PayPal getting into this space has been great for our business because it causes companies to start asking the question of should they accept crypto payments,” Pair said. By his words, BitPay had close to 50% revenue growth last year