The number of active bitcoin users worldwide will reach 4.7 million by the end of 2019, marking a significant gain over the 1.3 million last year, according to a report from Juniper Research we received today. However, the report, “The Future of Cryptocurrency: Bitcoin & Altcoin Impact & Opportunities 2015-2019” notes that exchange trading will continue to dominate bitcoin use, with retail adoption largely restricted to niche demographics.

Retail activity ‘extremely low’

While a number of high profile retailers are enabling bitcoin payment, both online and offline deployments are extremely low. Dr. Windsor Holden, the report’s author, observed,

“While average daily transaction volumes have increased by around 50 percent since March 2014, the indications are that much of this growth results from higher transaction levels by established users rather from any substantial uplift in consumer adoption.”

The report cites a number of factors that hinder growth, most notably the difficulty in communicating the concept of cryptocurrency payments to end-users. In addition, bitcoin’s historical association with – and continued use by – criminals for illegal purchases and money laundering deters mass adoption.

Supply-side challenges

Another challenge: bitcoin hoarding by speculators can further restrict currency supply. In addition, a combination of cryptocurrency volatility, lower bitcoin yields, and rising electricity costs can threaten bitcoin mining profitability.

Other findings from the report include:

• The introduction of licensed, regulated exchanges could stabilize currency values and increase retail transaction adoption.

• The protocols behind cryptocurrency could be deployed in a real-time transactional settlement.

• “Pump and dump” currencies created solely as short-term investment vehicles continue to plague the altcoin market.

The whitepaper, “Will Bitcoins Bite Back?”, is available from the Juniper website along with further details of the full report and the attendant Interactive Forecast Excel (IFxl).

Juniper Research, based in Hampshire, U.K., provides research and analytical services to the global high-tech communications sector, providing consultancy, analyst reports, and industry commentary.