Bitcoin is losing its dominance over other cryptocurrencies in payments to merchants, crypto processor BitPay says

• Bitcoin's leaderboard position in crypto payments to merchants is falling, according to BitPay.
• Bitcoin use at merchants that use BitPay fell to 65% in 2021 from 92% in 2020, the company told Bloomberg.
• Ether and stablecoins made up a substantial chunk of payments made to merchants last year.

Bitcoin's dominance in making cryptocurrency payments appears to be fading.

Both people and businesses are using other crypto coins to make cross-border payments, bitcoin payment service provider BitPay recently told Bloomberg.

Transactions made in bitcoin towards merchants that use BitPay tumbled to about 65% of payments in 2021, a sharp drop from 92% in 2020, the company said. Ether made up 15% and stablecoins were 13%. The least-used tokens to make payments were those added only recently to BitPay's roster — dogecoin, shiba inu, and litecoin — which accounted for 3%.

This shift away from bitcoin happened partly due to a preference for stablecoins, while other cryptocurrencies were dropping, Atlanta-based BitPay said. Another factor might be users not wanting to spend bitcoin if they think its price could increase 10-fold within a year.

Stablecoins are cryptocurrencies pegged (or have a fixed exchange-rate) to a real-world asset like gold or the dollar. These are designed in a manner to maintain a stable price over time. For instance, one USD Coin (USDC) is intended to always be worth one dollar. Meanwhile, bitcoin is a highly volatile crypto asset.

People used their cryptocurrency to buy luxury goods including cars, jewelry, boats, watches, and even gold, according to BitPay. The company's transactions for luxury goods soared 31% in 2021 from 9% in 2020, while overall payment volumes rose 57% year on year. It had 50% revenue growth last year.

10-year-old BitPay aids companies including Microsoft, Amazon, and Apple in enabling customers to make cryptocurrency payments. Its transaction volumes can serve as a reference for which types of tokens are being used most.

Cryptocurrencies have recently taken a hit after the Federal Reserve's December meeting further fueled market expectations of a possible rate hike in March, enough to weaken crypto and tech stocks. This has heightened concerns about a liquidity squeeze, which can be a pressure on risk assets.

"Our business ebbs and flows to some degree with the price. When the price goes down, people tend to spend less," BitPay CEO Stephen Pair said. "We have not experienced as much of a decline in volume with this recent pullback. It's probably just a reflection of more and more companies that need to use this as a tool to conduct payments."

Bitcoin was last trading at $42,662, down from an all-time high of $69,044 in November. It's risen just 16% in the last year, compared with the S&P 500's 23% gain.

Read More: Metaverse and meme coins have crashed into retail investing giant eToro's top 20 while some other cryptos have seen open interest plummet