How should Bitcoin be treated: asset or transaction medium

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How should Bitcoin be treated: asset or transaction medium

When Satoshi Nakamoto created Bitcoin, he wanted to make the best medium of payment. Its key advantage would be the immunity to the flaws of the fractional-reserve banking system. Because it is still a new technology, mass adoption has not occurred yet and it might take some years until it happens. The question is: how should Bitcoin be treated? Is remaining an asset an option? Or should the movement to real currency happen, at some point when the crypto market is ready?

Bitcoin remaining an asset

I believe Bitcoin remaining an asset would not resist long-term. Why is that? Because if the public will not use Bitcoin for transactions in the future, it would lose most of its value. Trust in future adoption is what drives its price in the order of thousands of dollars. The 2017 bull run was a moment when people thought now is the time of cryptocurrency adoption and it is going to happen. Unfortunately, a few months later it was clear that it is not ready for mass adoption and this decrease became even worse because of two things: government regulation and startups cashing out any funds in cryptocurrencies.

So, Bitcoin does not have a long-term future if it stays the way it is now, an asset. The future potential is what gives this asset value.

How the adoption will happen

It’s important to say that sustainable adoptions happen naturally, without anyone’s intervention. Any artificial growth will eventually become null. The market will take care of it in a shorter or longer period.

One catalyst that I believe will certainly play a role in mass adoption is the crypto infrastructure. People need a simple solution in order to use cryptocurrency. Fortunately, cryptocurrency tends to become less and less difficult to use, with products such as Trezor, Revolut and Wirex – which offer storage, exchange, or even a debit card infrastructure for coin transactions. These are actually the moment we will see how people really react to such a change. It is also a moment when the reduced fees of cryptocurrency shine, in comparison with any bank’s international wire commission.

I also think that mass adoption will begin after a moment when cryptocurrencies enter the spotlight once again. And I believe an opportunity is coming soon. Equity markets are close to a crash. People will rush to move their money in other asset classes. Some might choose real estate (if the market doesn’t go down like 2008). Despite this, most of the people coming from stocks are looking for liquidity. Bonds are safe, but sometimes difficult to do transactions with. Let’s say there is a solution for such a problem: bond funds. But it is also important to take into consideration that investors like diversity, so they will not put all of their money in bond funds.

Why might equity investors go into crypto?

Stocks are liquid, but cryptocurrencies are twice as liquid. One of the reasons equity investors choose the stock market is for its liquidity, so the fact that crypto is even more liquid will be a good plus for them.

It is also worth mentioning that this will not happen unless there is some investor infrastructure. I am optimistic about this, since companies like JPMorgan and Bakkt are working on this. There are articles on this blog for each (Bakkt, JPMorgan). My recommendation is to read them in order to understand the current status of what is going on.

Lastly, investors are generally joining a trend if other investors do. Either because of FOMO (Fear Of Missing Out) or just because they see it as a good idea. There are a few big investors in the market (such as the Winklevoss twins, for example), but when many institutions will enter will be the moment individuals will join in a big number.

Conclusions: how should Bitcoin be treated

Summing up everything I have analysed above, there are a few things that you need to keep in mind:

  1. Bitcoin is an asset just because of the reason it has the potential to become a transaction medium and will lose its value if nothing happens. How should Bitcoin be treated? As a currency, long-term. Currently, it is just an asset.
  2. Mass adoption has to happen naturally; any artificial increase is null on a long-term timeline
  3. People will adopt crypto if there is the infrastructure and the public’s trust: companies are working on this
  4. Adoption will start the moment crypto enters the spotlight and I estimate it to be at the same time with the following equity markets crash – when Bitcoin will be treated differently, it will spread
  5. First, there will be the institutional investors moving the money from stocks, then the individual investors following the first-tier, and lastly the public that will adopt, because Bitcoin will be treated a lot more seriously

If you have any other ideas about what is going to happen, make sure to leave a comment below. Wanna have a chat with me personally? Contact me using this link.

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