Bitcoin has become a mainstream investment, and the proportion of American adults holding Bitcoin may exceed that of gold.
Original title: “Viewpoint丨Has cryptocurrency become mainstream? 》
Written by: Fraud Stamp
Translation: Sherrie
The latest news of PayPal’s entry into the cryptocurrency field is another recognition of the future of cryptocurrency. Many titles read “cryptocurrency is becoming mainstream.” You might think that they have said this for many years. You are right, it is true. But considering that Bitcoin is only 12 years old, they cannot say that it is too long. In fact, we argue in this article that cryptocurrency has become mainstream. Let us explain why we say that…
The first question we have to ask is, what does mainstream mean?
“It describes the “normal” in the eyes of most people in society. The mainstream is universal.”
-Vocabulary.com
Is it common to own cryptocurrency?
Maybe this is not the right question, maybe the important thing is not ownership, but consciousness. Obviously, 90% of Americans have heard of Bitcoin, while 93% of the UK and 66% of Europe have heard of it. If consciousness is a measure of asset going mainstream, then Bitcoin has arrived.
However, some people say that awareness or ownership is not important, what is important is frequent use, or in some people’s words, adoption .
Let us turn our attention to stocks. I don’t think that stocks as an asset class are not a mainstream asset, because more than 52% of Americans hold stocks in some form or form.
The actual percentage of Americans who hold cryptocurrency, or more precisely, Bitcoin, is much harder to predict. In various surveys, this number ranges from 6.2% to 14.4%. We believe that around 10% is more likely. Obviously, this is a far cry from holding stocks.
Although these percentages are only rough estimates, let us now look at the number of users. I need to remind that this is a rougher estimate!
ownership
Although blockchains are transparent, the numbers they show do not help our investigation. Take Bitcoin as an example. The number of bitcoins in many wallets is zero or extremely low. Moreover, many people have multiple wallets . To make matters worse, it is estimated that 23% of Bitcoins are “lost”. This means that the data we have seen regarding the number of Bitcoin owners is somewhat misleading .
Two numbers are common among commentators, that is, the number of blockchain wallets exceeded 54 million in September 2020, and addresses with balances exceeded 30.4 million. Estimates of ownership vary widely, ranging from 13 million to 27 million. However, these data also have fundamental flaws, because they ignore those who don’t have Bitcoin or other cryptocurrency wallets. They buy cryptocurrencies through an exchange, which keeps their coins in a centralized wallet.
Let us put these numbers in perspective. The two largest exchanges, Coinbase and Binance, have a total of 45 million users (Coinbase 30 million and Binance 15 million). It is estimated that there are approximately 100 million Bitcoin owners , including centralized wallets .
Another interesting fact related to this. do you know? 55.4% of Bitcoin owners also invested in another cryptocurrency. This means that most holders of other digital currencies already hold Bitcoin .
On this basis, the number of more than 100 million cryptocurrency owners is a reasonable estimate, and the United States is the country with the most cryptocurrencies.
active user
Well, this gets the number of cryptocurrency owners, albeit in an unsatisfactory way. What about active users? This is another possible indicator of whether cryptocurrencies have become mainstream.
There are about 300-500,000 people using Bitcoin every day. Blockchain.info estimates that there are an average of 550,000 active addresses. Some surveys show that only 8% of Bitcoin owners hold electronic money as a payment tool. These surveys show that most owners of Bitcoin and other cryptocurrencies are long-term holders, and they may buy Bitcoin out of the idea of ”fearing missed opportunities .” This is not a good reason for mainstream adoption, but for cryptocurrencies, and more specifically, Bitcoin has become a mainstream investment, it is a good reason. To prove it. It is estimated that 11% of American adults hold gold as an investment, and 14% hold Bitcoin .
Has cryptocurrency become mainstream?
Based on the analysis of our preliminary estimates, we can draw the conclusion that Bitcoin is currently a mainstream investment with a similar amount to gold, and gold is the core component of the most diversified investment portfolio .
Most bitcoins are purchased through exchanges and stored in a centralized wallet that is ultimately controlled by the exchange. This is the perfect solution to overcome the main barriers to mainstream cryptocurrency ownership and adoption-security and custody. However, it is important for investors to buy through regulated and bonded exchanges rather than through non-compliant operations.
Near future
Interestingly, although the rate of adoption is slow, it will only increase as PayPal enters this market and utilizes its 350 million users. However, PayPal is joining the ranks of applications such as Cash, with 30 million customers, making waves in the market; eToro has a similar number of customers; Revolut and Robinhood Crypto both have more than 13 million customers, and they both provide cryptocurrency to consumers. However, PayPal will have the greatest impact on the adoption of cryptocurrencies, allowing people to use their crypto assets to purchase goods and services .
In addition, Coinbase will launch an encrypted Visa debit card next year. Now, owners have an easy way to use the cryptocurrency they hold for daily transactions. It seems that Bitcoin and some other major alternative currencies (Ethereum, Bitcoin Cash and Litecoin are accepted on the PayPal platform) are being accepted by the mainstream.
It is women who drive the future. Currently only one in ten people own cryptocurrency . However, women account for 70% of retail spending. When women begin to feel comfortable using cryptocurrency in their daily lives, then the usage will increase.
The other side of the cryptocurrency equation
We have been discussing whether the cryptocurrency is mainstream or not just considering a small part of the cryptocurrency ecosystem. We have been exploring its ability to store value and serve as a medium of exchange. But in other areas of the cryptocurrency market, we have not checked, such as the rapidly expanding decentralized finance or DeFi fields. DApps provide a variety of cryptocurrency lending opportunities and automated transactions.
In addition, there are other DApps that provide functions such as games, gambling, and file storage. These DApps are still in the early stages of adoption. The average daily users in the DeFi field are less than 7,000, and all DApps have 80,000 daily users. Although many DApps offer exciting risk opportunities, they are still a long way from becoming mainstream, although we believe they will eventually become mainstream . In the next few years, direct ownership of cryptocurrencies will also become mainstream, but at present, this is still too confusing for ordinary investors, and the thought that their money will be lost will discourage the most risky investors.
The risks of mainstream adoption
Everyone says that scalability is the main obstacle to mainstream applications. To some extent this is true. But with the help of PayPal, if Ethereum or Bitcoin can only process a dozen transactions per second, and Visa can process 56,000 transactions per second, it really doesn’t matter. The main risk is still its volatility. Market volatility will not discourage speculators or holders, but will deter those who use it to pay bills and buy coffee. However, in reality, the more people who use cryptocurrency or Bitcoin in this case, the less price fluctuations will be. In the long term, we do not believe that volatility will affect Bitcoin adoption .
Other interesting developments
Bitcoin ETF
If the Securities Exchange Commission approves Bitcoin-backed exchange-traded funds (ETFs), the number of people in the U.S. who own Bitcoin could rise sharply. Although they have rejected all applications so far, the reason is that none of the proposals prove that “the Bitcoin market is sufficiently resistant to market manipulation.” That day will finally come. Although the launch of Bitcoin exchange-traded funds will not affect acceptance, it will significantly increase the number of people holding Bitcoin as part of their investment portfolio.
Institutions are also involved
Billionaire and hedge fund manager Paul Tudor Jones (Paul Tudor Jones) recently described Bitcoin as “the fastest horse in a horse race.” He bought about $180 million in Bitcoin, accounting for the value of his fund. 2% (estimated at 9 billion US dollars). After this large-scale acquisition, Microstrategy, a listed enterprise software company, was revealed that it currently holds more than $500 million in Bitcoin. It will not take long for a large amount of institutional funds to flow into Bitcoin.
Facebook’s Libra
As early as 2019, a long time ago, Facebook announced its own stable currency Libra. It caused a lot of commotion, so much so that they quietly continued the project without much publicity. Facebook stated that they will not launch Libra until all necessary approvals have been obtained. In the face of this hot potato, they cannot afford the normal practice of “fail fast.” The introduction of Libra will further broaden the cryptocurrency market and provide an alternative to other stable currencies . However, even though Facebook has 2.7 billion users, this does not guarantee success. Many exciting plans often soar into the sky, and Libra may be doomed to the same fate.
Bitcoin myth
Investors of new cryptocurrencies generally believe that due to the limited supply of bitcoins, only 21 million bitcoins, as demand increases, the supply will be greatly restricted and the price will definitely rise sharply. What these novice investors don’t realize is that there are indeed 21 million bitcoins, but these bitcoins are divisible by 8 decimal points. This means that a Bitcoin actually has 100 million Satoshis (compared to 100 cents per dollar!) On this basis, if a Bitcoin is worth 1 cent per Bitcoin, then its value will reach 1 million USD , The market value will reach 18.4 trillion US dollars. In comparison, there are 1.2 trillion U.S. dollars in circulation. This lengthy explanation should make you understand that the supply of 21 million bitcoins is enough to support the lives of many people .
Who protects the interests of novice investors?
Finally, we have to ask one more question. All these companies have a goal to enter the cryptocurrency field, that is, to sell as much cryptocurrency as possible, so who will protect the interests of consumers?
Taking stock purchase as an example, the sale of stocks is mainly based on execution (that is, there is no recommendation). Securities brokers are regulated by the Securities and Exchange Commission, which means that if they neglect their duties, consumers are protected. There is no such protection in the case of buying cryptocurrency. Although the same risk warning applies to cryptocurrencies, as it does to stocks, there is significantly more complexity in the cryptocurrency market. Including rampant price manipulation and dumping schemes and the inflated trading volume reported by exchanges. Why do you think the SEC has not approved the Bitcoin ETF?
So, who will tell consumers about the risks, complexity and technical issues of buying cryptocurrency? Or does anyone need it? Can consumers take care of themselves?
These questions will get different answers depending on who you ask. We believe that consumers should at least do their own research. Many price predictions come from those with vested interests. Large exchanges always try to promote their other high-risk products. Who can consumers trust to obtain fair and up-to-date information?
