Data recently released by a well-known blockchain intelligence provider showed that Bitcoin payments were trending up as of January 2019. Simply put, more coins were being spent on actual products and services than in the past. Assuming that this trend continues its upward motion, should it be considered a good thing for cryptocurrency in general?

Common sense would dictate that more Bitcoin-based commerce is good for all cryptos. This understanding is based in the knowledge that crypto is a monetary system first and foremost. The utility of any cryptocurrency is found in buying and selling. And by that, we do not mean buying and selling the coins themselves. We mean using the coins to transact business between merchant and customer.

By the numbers

Before we discuss the implications of this recent upward trend, let us talk actual numbers. According to Chainalysis, consumers spent in excess of 32,000 bitcoins this past January. That represents a 47% increase over the same period for 2018. That is pretty impressive. You can bet Visa and MasterCard would be celebrating big-time if use of their cards jumped 47% in a single year.

Having said that, more coins being spent does not necessarily mean more value being traded. Unfortunately, the crypto winter of 2018 saw the prices of most coins fall dramatically. Bitcoin was not spared. Chainalysis says the total value of Bitcoin payments in January 2019 was down 70% from the year before when measured in U.S. dollars.

This makes perfect sense. When the price of Bitcoin falls, so does its purchasing power. This is one of the fundamental truths that still makes merchants so wary of accepting Bitcoin payments. They do not want to be stuck with a wallet full of coins that suddenly have no value.

The practical implications of the trend

Knowing that 47% more bitcoins were spent this past January gives us a lot to think about. The practical implications here are fraught with both potential and possibility. Let us take a look at some of those implications, shall we?

First is the realization that more coins being spent implies crypto users using the coins more frequently for monetary transactions. Whether or not this means less enthusiasm about Bitcoin investing is unclear. But either way, it is encouraging that people are spending their bitcoins more frequently.

The next practical implication is found in the merchants taking bitcoins as payment. In order for consumers to spend their coins more freely, merchants have to be more willing to accept them. That appears to be the case. What we don't know is if the total number of merchants with a positive view of Bitcoin is growing, or perhaps those already accepting bitcoins are just accepting larger volumes.

Looking to make a profit

The third practical implication is important enough that it deserves its own heading. It could be that growing numbers of merchants are opening their doors to Bitcoin payments because they hope to make a profit from the coins they acquire. Despite still being stuck in crypto winter back in January, there were plenty of optimists saying crypto was about to pull out and start recovering. Maybe this inspired some merchants to start collecting coins.

Think of it in terms of earning a return on capital investments. Let's say you have a merchant with a solid cash reserve capable of sustaining business for 6 to 8 months. If there is any chance that Bitcoin will experience a significant bull market, it might be worth the risk to accept bitcoins as payment for goods and services.

Even if Bitcoins price falls temporarily, it is not the end of the world because that merchant has a cash reserve. He is, of course, taking a risk that the bottom will fall out on Bitcoin and he will lose it all. But that is a risk he is willing to take. If there is a bull market that pushes Bitcoin up several thousands of dollars, that merchant stands to make a hefty profit for doing nothing other than accepting Bitcoin payments.

Minimal investment value

One last thing to consider here is that the investment value of any cryptocurrency is minimal during periods of price deflation. During the crypto winter, there wasn't much incentive for investors to load up on coins without any idea of when prices would start increasing. Remember that if prices remain static for too long, the money tied up in crypto becomes dead money. It is not earning anything.

Smart investors take that money and put it elsewhere. Then, just when they think that their favorite cryptos are about to go on a bull run, they start buying again. All of this points to more people spending coins than buying them as investments.

How bitcoins are being spent

Putting all the practical implications of the recent trend aside, let us get back to the main premise of this post: more Bitcoins being spent this past January as opposed to the same period in 2018. Perhaps you are new to this whole Bitcoin thing. Maybe you have no idea how bitcoins could be spent in real life. Fair enough.

Cryptocurrency news is awash with stories of how people are spending their coins. You just have to go look for them. Below are a few examples of day-to-day use.

Online gambling

Online gambling continues to be one of the most prevalent sources of cryptocurrency expenditures. Bitcoin is a wonderful electronic payment system for online casino operators because it allows them to accept deposits without having to deal with banks. This may not mean anything to you if you do not run a business. Believe us when we say it is a godsend to casino operators.

Online operators in many places around the world have trouble finding banks willing to do business with them. And even when banks are accepting of their businesses, the accounts that offer can be saddled with expensive fees and tight restrictions. Operators use banks out of necessity. If they can accept deposits while avoiding banks, all the better.

Likewise, there are places in the world where online gamblers either cannot use their bank accounts or are discouraged to do so. Bitcoin and other cryptocurrencies are the perfect solution. Individuals can purchase bitcoins at an exchange, transfer those coins to their wallets, and then use them to make deposits at online casinos.

Paying for travel

Although cryptocurrencies are nowhere close to being the dominant method for paying for travel, growing numbers of online travel operators are starting to accept big-name coins. Websites like Cheap Air and Surf Air allow customers to pay for their airline tickets using bitcoins.

Are you interested in booking future space travel with Virgin Galactic? Rumor has it they accept Bitcoin payments as well. Of course, you have to be independently wealthy to book a trip, but it's there if you want one.

Purchasing digital content

Last year Microsoft briefly interrupted Bitcoin payments for its digital content due to price volatility. They reinstated the payments a week later. Why do we mention this? Because Microsoft is just one of several tech companies that are not afraid to accept limited amounts of cryptocurrency as payment for digital films, music, games, and apps.

Online shopping

As we have discussed in many previous blogs, cryptocurrencies are making their way into the online retail segment fairly rapidly. If you know where to shop, you can buy a lot of different things online using your coins. Buy a camera from Japan or some bling from Italy.

Eating and drinking

Cryptocurrency is gradually becoming a more popular option among eating and drinking establishments. Paying for food and drinks with bitcoins is especially popular in Australia for reasons no one has adequately explained. Perhaps they just love their Bitcoin down under.

Eating and drinking with crypto is not exclusive to Australia, though. In just about every major city in the world you can find pubs, coffee shops, and sidewalk bistros more than happy to take your bitcoins off your hands. You just have to be willing to look.

Getting around town

As long as you are looking for bars and bistros where you can spend your bitcoins, you might as well look for a crypto-friendly transportation option. As we have mentioned numerous times in the past, London taxicab drivers are starting to warm up to crypto. Their counterparts in Argentina and Hungary are doing the same.

It probably won't be long before mass transit gets on the crypto wagon as well. If that is what it takes to get people to abandon their cars in favor of buses and trains, so be it.

We could go on and on here. We don't need to, because you get the point. The take-away is that cryptocurrency's original intended purpose was to be a monetary system rather than an investment. Every merchant who decides to start accepting cryptocurrency payments brings us one step closer to realizing crypto's original mission and vision.