Pay For Coffee With Crypto? Analyst Weighs In On Prospect of Wider Bitcoin Adoption

Zinger Key Points
  • Bitcoin and other cryptocurrency adoption can increase if transaction costs are reduced and more merchants begin to accept cryptos.
  • Strike proposed payment system using Lightning networking and its NCR and Blackhawk partnerships will accelerate retail adoption.

Cryptocurrency adoption is slowly but steadily rising amid increasing awareness of these digital currencies and use cases. An analyst at Morgan Stanley delved into what it would take to accelerate the pace of adoption.

The Pushbacks: Two factors weighing down on Bitcoin BTC/USD adoption are the higher transaction costs involved and the limited number of merchants accepting it as a payment option, analyst Sheena Shah said in a report.

The $1.50 average fee for transacting Bitcoin on the underlying blockchain may appear low but the fee is highly variable and depends on demand, the analyst said. When Bitcoin was trading above $60,000 in April 2020, the average fee escalated to $60, the analyst noted.

"If you want to buy a $5 coffee, paying a 30% fee just doesn't make sense," Shah said.

Some online retailers have been accepting Bitcoin and other cryptos for several years but the list remains limited, the analyst said. She noted that only eight out of the top 500 online retailers accept Bitcoin as of date.

Since more than 85% of the sales in the U.S. occur in stores, acceptance by brick-and-mortar stores is also important, the analyst said. Even stores that initially announced the acceptance of cryptos have discontinued, as it was all part of trials that ended, she added.

Shah noted some of the U.S. retailers that allow direct crypto payments through Flexa and Gemini Pay are Barnes & Noble Education, Inc. BNED, Baskin-Robbins, Bed Bath & Beyond Inc. BBBY, Nordstrom, Inc. JWN.

Related Link: Bitcoin, Ethereum, Dogecoin Down As Fed's Powell Dials Up Hawkish Tone: Why Cryptos Could See A 'Strong Recovery'

Fixing Higher Transaction Costs: Transaction costs can be reduced by using alternative scaling solutions, Shah said. These solutions can reduce some of the computational load for the underlying blockchain system by sending only some transactions to be checked by miners, she added.

The analyst noted the fee to send a Bitcoin transaction using the Lightning Network is close to zero, making it a preferred option for small payments that would otherwise be made using a debit card, the analyst said.

Strike announced a payment system at the Bitcoin 2022 conference that uses Lightning Network, Shah pointed out. The analyst said the company's partnership with NCR and Blackhawk suggests a large number of physical stores, restaurants and cafes in the U.S. will be able to accept Bitcoin in the near future.

Strike, Shah said, is also working with mobile payments apps that may soon allow users to go to a payment terminal using NCR software and scan a QR code on their phone to pay. The analyst sees this announcement as significant as one in six POS devices globally uses the software provided by NCR.

At last check Friday morning, Bitcoin was seen trading down 6.32% at $38,795.83, according to data from BenzingaPro.

Related Link: How to Buy Cryptocurrency

Market News and Data brought to you by Benzinga APIs
Price Target
Posted In: Analyst ColorCryptocurrencyPenny StocksSmall CapMarketsAnalyst RatingsTrading IdeasBitcoin 2022Bitcoin Conference 2022Lightening NetworkMorgan StanleySheena Shahstrike
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!