The value of all cryptocurrency transactions will fall sharply this year to just over $30 billion, compared with over $71 billion in 2014, Juniper Research predicts.
Jupiter’s report claims that the decline will be attributable to the combined impact of exchange collapses, Bitcoin theft, and regulatory concerns around cryptocurrency’s role in funding dark web purchases.
According to the report, the surge in “altcoin”—literally, all types of cryptocurrencies except Bitcoin—transactions in 2014 was overwhelmingly attributable to brief spikes in activity during the first quarter in Dogecoin, Litecoin, and Auroracoin. By the end of the year, daily dollar values of these transactions were at less than 5% of their earlier peak.
However, the report argues that the introduction of licensed, regulated exchanges could lead to a stabilization in currency values, and with it an increase in retail transaction adoption. The report points out that in an unregulated marketplace, consumer confidence has been eroded by the demise of the Mt. Gox exchange in February 2014 and the recent theft of nearly 19,000 Bitcoins from BitStamp hot wallets.
Nevertheless, despite the fact that PayPal has now begun to allow U.S. consumers to purchase digital goods via Bitcoin, the report argues that the scale of the challenges facing Bitcoin is so great that it will struggle to gain traction beyond a tech-savvy and/or libertarian demographic.
Instead, the report identifies a longer-term role for cryptocurrency protocols in the wider payment space.
"It is likely that we will see the technologies behind cryptocurrency deployed in areas such as real-time transactional settlement,” says report author Windsor Holden. “Ripple Labs is already focusing overwhelmingly on that approach and in the medium term we may see a role evolution to this end among other cryptocurrency players.”