Completely false. Occasionally you will read a newsstory about a merchant who stopped accepting BTC. But, as of today 160k+ merchants accept it, and there was never any large scale event where "all" of them stopped accepting it.
http://www.businessinsider.com/merchants-arent-accepting-bit...
Also this Morgan Stanley research note, and the reporting on it, is of laughable quality...
1) They don't release data: "Morgan Stanley, which based its usage analysis on the information, didn’t say which companies are using bitcoin."
2) They extrapolate from an insufficient number of data points: 3 companies in the top500 this year, down from 5 last year, accept Bitcoin. It's like saying Ferrari's market share is dropping because only 3 billionaires bought a Ferrari this year, down from 5 last year.
3) They attribute a quote to the analyst ("The disparity between virtually no merchant acceptance and Bitcoin’s rapid appreciation is striking,") when in fact it was a quote from Overstock CEO: https://cointelegraph.com/news/bitcoin-merchant-shunning-is-...
4) They claim Bitcoin's skyrocketing price is one of the causes of the decrease in payments. They present of course no facts to justify this theory, because it's false. In the past, anecdotal data reported by merchants has shown precisely the opposite: customers spend their newfound riches.
When Bitcoin first hit $1000, many businesses started accepting bitcoin, even some hosters. Tipping bots became popular on forums, there were tutorials for old people on how to use bitcoin on TV and in the newspapers even, etc.
Now? I don't know a single business I use that offers bitcoin payments. All of them have removed it again. Bitcoin's actual value as currency has gone down massively.
Yes, it is used. A lot, even. But not as day-to-day currency.