Why Bitcoin Has Failed as a Means of Payment

1. The Experiment: El Salvador — and Why It Failed

On June 7, 2021, El Salvador made history under President Nayib Bukele: It became the first country in the world to declare Bitcoin legal tender. Every merchant was required to accept Bitcoin. The government developed the “Chivo” wallet app and gave every citizen $30 in Bitcoin as a starting balance.

The experiment was the biggest real-world test of Bitcoin as a means of payment — and it ended with a sobering conclusion.

“Bitcoin usage remains marginal with minimal circulation as a payment method.” — IMF assessment, December 2024

In December 2024, the International Monetary Fund (IMF) presented El Salvador with a choice: either repeal the Bitcoin mandate — or forgo an urgently needed loan of $1.4 billion . El Salvador relented. The requirement for merchants to accept Bitcoin was lifted. Tax collection in Bitcoin was discontinued.

El Salvador by the numbers:

• → June 2021: Bitcoin becomes legal tender
• → $30: Initial balance per citizen in the Chivo wallet
• → December 2024: IMF forces reversal as a condition for $1.4 billion loan
• → Result: “Marginal usage” — most citizens spent the $30 and never used the wallet again

The Economist summed it up succinctly: “El Salvador’s Bitcoin experiment was a failure.” And if an entire country, with government subsidies, a free wallet app, and mandatory acceptance, cannot manage to establish Bitcoin as a means of payment — then the problem does not lie in a lack of will.

2. The volatility problem: If your coffee costs 20% more tomorrow

A means of payment must have one fundamental characteristic: price stability . If you buy a coffee for 3 euros today, a coffee must cost roughly 3 euros tomorrow. Not 2.40 euros. Not 3.60 euros.

Bitcoin does not provide this stability. According to BlackRock (the world’s largest asset manager), Bitcoin’s annual volatility is 30–40% (as of 2025). By comparison: The euro fluctuates against the U.S. dollar by about 5–8% per year.

What 30–40% volatility means in practice:

In October 2025, crypto positions worth $20 billion were liquidated in a single day. Imagine you had received your salary in Bitcoin the night before — and the next morning, 15% of it would simply be gone.

That’s not a means of payment. That’s a casino with blockchain.

3. The fee problem: $50 for a $5 cup of coffee

Every Bitcoin transaction must be included in a block by miners. To do this, the sender pays a transaction fee. This fee is not fixed — it depends on network congestion.

Bitcoin transaction fees:

• → Average: $2–50 per transaction (depending on network congestion)
• → Peak values: During the Ordinal hype in 2023, fees at times exceeded $60
• → For comparison: A Visa transaction costs the merchant 0.5–3% of the amount. For a 5-EUR coffee: a maximum of 15 cents

With a transaction fee of $10 for a $5 coffee, the buyer effectively pays $15 — three times the price. During peak times, the fee can exceed the purchase price by a factor of ten.

For large transfers—say, $100,000 —the fees are actually cheaper compared to bank transfers. But as a means of everyday payment, Bitcoin is thus structurally unusable .

4. The Speed Problem: 7 TPS vs. 65,000 TPS

Bitcoin processes a maximum of ~7 transactions per second (TPS) . This is a hard technical limit, dictated by the 1 MB block size and the 10-minute block time.

7 transactions per second. The entire Bitcoin network processes fewer transactions in an hour than Visa does in a single second. If all Germans tried to pay with Bitcoin at the same time, the queue would take months.

But what about the Lightning Network?

The Lightning Network is a second-layer solution that processes Bitcoin transactions off-chain, thereby theoretically enabling millions of TPS. In theory, it solves the speed problem.

In practice, things look different: Adoption by merchants remains minimal. Most retailers who accept Bitcoin don’t actually use it. The user experience—opening channels, providing liquidity, routing issues —is too complex for the average consumer. After over 6 years of development, Lightning has not changed everyday payment habits.

5. The Merchant Problem: Immediately Back to Fiat

Here lies a particularly revealing irony: The few merchants who accept Bitcoin do something that undermines the entire purpose — they immediately convert Bitcoin into fiat currency .

Payment processors like BitPay, Strike, or OpenNode offer exactly this service: The customer pays in Bitcoin, the merchant receives dollars or euros in their bank account. Within seconds. Without ever owning Bitcoin.

If the merchant immediately exchanges Bitcoin for dollars, Bitcoin is not a means of payment—it is a detour. The customer could have just paid with a credit card instead, faster and cheaper.

Why do merchants do this? Because they can’t pay their rent, their suppliers, or their employees in Bitcoin. Because volatility ruins every calculation. Because the tax office wants taxes in euros or dollars— not in satoshis.

If 100% of merchants who accept Bitcoin convert it immediately to fiat, then Bitcoin has structurally failed as a means of payment. It is a facade—the infrastructure looks like a Bitcoin payment, but the economic cycle continues in dollars.

6. The Manipulation Problem: 70% Wash Trading

A functioning means of payment requires that the market price be real—that purchases and sales reflect genuine economic activity. This is not the case with Bitcoin.

According to Chainalysis (2025) , over 70% of trading volume on unregulated exchanges is wash trading — that is, trading in which the same entity acts on both sides to generate artificial volume .

What wash trading means:

For a means of payment, this is fatal: If the price is manipulated, no one can be sure what a Bitcoin payment will be worth tomorrow. Volatility — which already arises from genuine trading — is further amplified by wash trading.

The five causes of death at a glance

Conclusion: Bitcoin is digital gold — but not digital money

Over 16 years, Bitcoin has proven itself to be an exceptional asset. As a store of value, it has outperformed gold. As an ideological statement against central banks, it has sparked a movement. As a technology, it has launched the blockchain revolution.

But as a means of payment? It has failed. On every single criterion that a means of payment must meet: stability, speed, cost, acceptance.

Satoshi wanted to replace banks with Bitcoin—not money itself. And that is precisely the fundamental misunderstanding: Bitcoin solves the trust issue in the banking system. But it does not solve the problem that money must solve— namely, being a stable, fast, and affordable medium of exchange for everyday life.

El Salvador has proven this in practice. The $20 billion in liquidations in a single day proved it. The 7 transactions per second prove it anew every day.

Bitcoin was never intended as a replacement for the euro or the dollar — it was intended as a replacement for trust in banks. And in this role, it has found its place. As digital gold. As a decentralized store of value. As an object of speculation.

Just not as “Peer-to-Peer Electronic Cash.”