Disclaimer: Opinions expressed in this article do not constitute investment advice from Bitcoin Reserve.
The tide is swiftly turning in favor of bitcoin adoption. It's fair to say at this point critical mass has taken hold. Yet, while bitcoin is arguably past the point of subsistence, mass adoption is still a long way off. Here's how far bitcoin has come and where it needs to go next.
A recent survey revealed that over 47% of respondents trust bitcoin more than the banks—a 29% increase in three years. The poll, which surveyed 5,000 respondents across 17 countries, aimed to compare bitcoin adoption rates from 2017 to 2020. Approximately 45% noted that they preferred bitcoin over investments in stocks, real estate, and even gold, marking an uptick of around 13% over the 2017 survey.
These results appear to be reflected in the number of people holding bitcoin. Earlier this year, blockchain analytics firm Glassnode determined that over 23 million "entities" hold a stake in bitcoin's finite 21 million supply. Since multiple individuals can lay claim to an address, and numerous addresses can belong to a sole individual, the firm decided to measure so-called "entities" based on a combination of "industry-standard heuristics, proprietary clustering algorithms, and advanced data science methods."
Regardless of the semantics, Glassnode detected an irrefutable and substantial increase in both addresses and entities holding bitcoin since 2012.
As touched upon within a previous research piece, institutional engagement in bitcoin is steadily mounting as well.
A survey released by Fidelity last month revealed that 36% of institutional investors (24% in the US and 45% in Europe) are exposed to digital assets such as bitcoin. Furthermore, the latest stats from institutional asset manager Grayscale indicate a sizeable $3.6 billion worth of BTC assets under management (AUM)—an increase from $3.3 billion AUM in May.
The above findings aren't particularly shocking—bitcoin's growing utility as an investment asset is indisputable.
This utility has been particularly evident throughout 2020. Even Bloomberg's 2020 Commodity Report admired bitcoin's staying power amid systemic collapse and looming stagflation
The report reads:
"Among the few assets up in this tumultuous year, gold and Bitcoin are building foundations for further price appreciation, in our view. The metal and the crypto remain our top candidates to advance in 2020, with added rally fuel from Covid-19."
As adoption starts to manifest, companies are beginning to dig into bitcoin. Most recent to join the fray is, reportedly, PayPal and its subsidiary payment service, Venmo. According to industry sources speaking to Coindesk, the pair may move to facilitate the buying and selling of bitcoin.
Many point to this as a precursor for mainstream adoption. Combined, PayPal and Venmo service over 365 million users—implying that the equivalent of the entire population of America could soon be exposed to bitcoin.
Cash Is Dead, Long Live Bitcoin?
While bitcoin hasn't quite yet come into its own as a fully-fledged form of currency, that may be slowly changing—especially as cash quickly falls out of favor.
Research from The Economist Intelligence Unit appears to suggest that global attitudes toward cash are shifting. 64% of survey respondents noted using digital payments for more than half of all their purchases.
At this point, a cashless future is almost an inevitability. According to the bank of international settlement (BIS), over 80% of central banks are actively working on, or researching, a central bank digital currency (CBDC).
Moreover, in the private sector, the stablecoin market is undergoing somewhat of a renaissance. In 2020, the market has expanded by over twice as much as it did in the last three years, conferring a dramatic increase in demand for digital forms of cash.
As discussed in a previous research piece, stablecoins have a particularly important function as a hedge against bitcoin volatility. But arguably, once this volatility is maintained, bitcoin could feasibly stand as a multifaceted instrument embodying both an investment asset and a form of currency—conceivably even a global reserve currency.
The rise of CBDCs—and to an extent, stablecoins—was underlined by a seminal speech from an unlikely source. Addressing a room full of central bankers at the Jackson Hole symposium last year, Mark Carney, former governor of the Bank of England, made a case for a global "synthetic hegemonic currency" to supplant dollar dominance and increase the global flow of trade.
The notion of the world's economies coming together under a single fiat currency is unrealistic, to say the least. For one, there's the Triffin Dilemma to overcome. As touched upon in one of our previous research pieces, the Triffin Dilemma illustrates the problem of conflicting interests between the national and global consequences of monetary policy in the country where a global reserve currency originates.
However, this dilemma could be easily conquered with bitcoin. Not only does bitcoin hold no allegiance to a single country, but it isn't subject to the whims of any central government. Instead, its monetary policy is decided by a set of predetermined computations.
While a fiat global reserve currency is likely unviable, bitcoin represents a legitimate alternative—one that could supplant US dollar dominance, improve economic stability, and foster financial inclusion.