It’s not often you hear someone brag about buying coffee with “money” — unless you’re moving among Bitcoin circles.

Being able to use the cryptocurrency at chains like Starbucks Corp. and Pizza Hut is being touted as a payments revolution by the looks of various selfies and videos coming out of El Salvador. President Nayib Bukele established Bitcoin as legal tender in the country (alongside the U.S. dollar) in September as a bid to lure digital wealth. 

Buying coffee with crypto is also getting attention in the U.S., where it’s been hailed as a driver of digital-asset adoption by wallet app Bakkt Holdings Inc., majority owned by Intercontinental Exchange Inc. The app’s ability to convert Bitcoin balances into U.S.-dollar Starbucks rewards (with average fees of 2%) is, in the firm’s view, a self-sustaining “flywheel effect” that justifies its lofty digital-economy goals and valuation.

This hype over rather mundane electronic transactions — is anyone bragging about paying for Starbucks with ApplePay and PayPal? — is a sign of how badly evangelists want to promote Bitcoin as more than a speculative, gold-like asset that currently trades at $65,000.

But it’s not representative of a self-sustaining crypto boom. Paying for a cold brew with Bitcoin is more meme than reinvented wheel.

Despite Bitcoin’s initial ambition as a peer-to-peer payment mechanism designed to avoid middleman fees, the cryptocurrency is still overwhelmingly traded and hoarded like a speculative commodity. The artificial restriction of Bitcoin supply (capped at 21 million) made the token valuable as an asset long before it could establish itself as a payment method.

The price booms (and busts) that have made Bitcoin a rollercoaster ride for traders are precisely what hinders its broader adoption as a means of payment. When Bitcoin’s price doubles in six months, the dollar amount spent on yesterday’s latte can suddenly feel like splashing out on a Lamborghini. (Remember 2010’s infamous pizza order for 10,000 Bitcoin?) When it tumbles by almost half in a few weeks, there’s a dash for cash, not cappuccinos. 

Some fans recognize this. Earlier this year, crypto billionaire Mike Novogratz compared buying a Diet Coke with Bitcoin to “paying for it with gold … That won’t happen.” Longstanding scalability issues such as transaction processing, fees and energy consumption — not all of which have been solved by the Lightning Network on display in El Salvador — even make Bitcoin look “laughable” as a serious payment alternative, as private-equity investor Chris Flowers put it. 

What about Bakkt’s flywheel effect? Can creating apps to buy coffee with digital currency help pave the way toward widespread crypto adoption? The firm’s recent quarterly loss suggests that’s a long road ahead, at least in the U.S.

Jefferies analysts estimate the firm’s average marketing spend per user at $12, while estimated average revenue per user is around $10. The Fear Of Missing Out (FOMO) seen in crypto markets doesn’t seem to be plaguing Bakkt, which says it had 1.7 million transacting accounts year-to-date, below its initial projections of 9 million active users by end of 2021. Bakkt Chief Executive Officer Gavin Michael said via email that the company is “just getting started” and points to new partnerships such as the one with payments giant Mastercard Inc. 

Peter Garnry, a strategist at Saxo Bank, tells me that the last quarter of 2021 will be crucial for Bakkt to show a significant rise in people using the app for real purchases like coffee. 

Maybe it’s not so surprising that gaining traction in a mature market like the U.S. is slow-going. Advocates say paying for Starbucks in El Salvador is the real starting gun. Still, Bitcoin faces competitive pressure everywhere as new payment tokens and stablecoins keep multiplying. Talk of coffee is a pretty handy distraction for an asset class that’s also known for scams, speculation and ransomware, with regulators keen to act. 

Given Bakkt’s centralized, regulator-friendly structure, its broader vision as a digital wallet for everything from air miles to video-game items, not just Bitcoin, might pay off. Maybe there is a future for monetizing small pots of illiquid assets that can’t be easily spent. “I bought coffee with air miles” is far less exciting than Bitcoin — but right now, it’s just as realistic.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lionel Laurent is a Bloomberg Opinion columnist covering the European Union and France. He worked previously at Reuters and Forbes.

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