FILE PHOTO - A Bitcoin sign is seen in a window in Toronto Thomson Reuters The price of bitcoin is up over 250% since last year, but acceptance of the cryptocurrency as a form of payment among top merchants has declined.

A research note out Wednesday by a group of analysts at Morgan Stanley led by James E Faucette said "bitcoin acceptance is virtually zero and shrinking," despite its impressive appreciation.

According to the bank, last year bitcoin was accepted at five of a group of 500 top online merchants. Today, only three of those merchants accept bitcoin as a form of payment.

"The disparity between virtually no merchant acceptance and bitcoin’s rapid appreciation is striking," the analysts wrote.

The investment bank outlined three reasons for the decline in bitcoin acceptance among merchants.

The first reason has to do with the appreciation of bitcoin. Most owners of the cryptocurrency are unwilling to let go of their holdings to pay for goods because they expect the price of bitcoin to go up. This point underpins the bank's thesis that bitcoin mainly functions as an investment vehicle rather than fiat currency that you could spend on goods and services.

Issues with bitcoin's scalability, which has made transactions slow and expensive, is another reason the bank thinks merchants find bitcoin unappealing as a form of payment.

Finally, there has been a lack of pressure from the people who run the bitcoin infrastructure, according to the bank, to push merchants to accept bitcoin as a form of payment.

"The ecosystem has focused more on value speculation rather than the foot leather-eating work of increasing acceptance - way easier to trade speculatively than convince new merchants to accept the cryptocurrency," the bank said.

The bank notes that, while many merchants are uninterested in accepting bitcoin as a form of payment, many find the technology that underpins the cryptocurrency as a tech they could use to improve their infrastructure.