Bitcoin Adoption

The rise and rise of Bitcoin – welcome to the mainstream


Recent years have seen an explosion in the popularity of cryptocurrencies. This isn’t a phenomenon limited to one particular country: it is something that has been happening the whole world over. Of course, any mention of crypto has to include bitcoin. It is, after all, the original and most recognised of the cryptocurrencies. However, that is not to say that bitcoin provides the whole story.


What we have seen over the last two years is the rise of meme coins. With Dogecoin being created as a joke, and the likes of Shibu Inu cashing in on the formers unexpected success, crypto was suddenly part of everyday conversations.


More and more people are starting to understand cryptocurrency, particularly the ability to rapidly transfer money or value. Due to the lack of permissions to transact, crypto transactions can be made around the world in a matter of minutes, usually with fees that are much lower than those associated with traditional methods. Beyond this though, why else are cryptocurrencies seeing an uptake in use? What is it about bitcoin that is driving its popularity? Let’s take a look. 


The impact of hyperinflation 


There are some countries where the use of cryptocurrency goes beyond a desire. It becomes a necessity. There are certain countries where currencies are particularly unstable. This can be caused by government corruption or by governments borrowing when there is little chance of repaying. Some countries have experienced severe hardship with Covid bringing a temporary end to tourism. This has had a devastating effect on currencies and led to people seeking an alternative that is less volatile. 


There are some who turn to the likes of gold or property in an attempt to counter hyperinflation. The problem here, especially when corruption exists, is that these assets can be stolen, seized, or destroyed. The fact that bitcoin is held digitally, in a secure wallet and key means it can be held securely. For example, a key can just be a 12-word seed held in memory. 


As a digital asset, bitcoin is designed to be decentralised. Whereas a government may impose strict controls on banks during times of hyperinflation, blockchain technology is designed to be permissionless and censorship resistant. Meaning governments have much less control. 


How else is bitcoin being used?


Bitcoin was created as a means to ultimately replace traditional banking and payment methods. It was never intended to just appear on a spreadsheet as a number. It was also intended to have practical uses. The proof that bitcoin can go all out and replace the banking systems of today can be found by looking at El Salvador: in 2020, this became the first country to accept Bitcoin as legal tender. 


Institutions are rapidly adopting cryptocurrencies, particularly Bitcoin. We can see evidence of firms incorporating digital assets into their treasury strategies alongside buying Bitcoin for general investment accounts.  The Fidelity Digital AssetsSM 2021 Institutional Investor Digital Assets Study revealed that seven out of 10 institutional investors expect to purchase or invest in digital assets in the future. 


It is not just institutions that are turning to Bitcoin. Consumers have also been given the opportunity to take advantage of what this cryptocurrency has to offer. Partnerships with the likes of PayPal, Visa, and Mastercard have added to the ease of using bitcoin for payments.


We are now also able to utilise crypto debit cards. These are accepted by over 200 million merchants spread across 100 countries. In addition to this, we will have all seen the headlines on the back of Tesla accepting Bitcoin as payment for its cars.  This shows that there is a real desire to use Bitcoin in day to day transactions and that it is becoming a reality. 


Crypto vs fiat currency


One of the major attractions of cryptocurrency is that it is not tied to a particular country or area. Fiat currency is issued by governments and is intended to be used in set locations. This means that the value of fiat currency is inextricably linked to how a government spends and, to some extent, how it behaves. Governments, in some countries, are even able to alter their interest rates so that they can impact the value of their currency. Crypto is free of such controls.


The price of Bitcoin is not at the mercy of any government. Instead, it is determined by the market and the current demand. It is also borderless meaning that it can be used anywhere in the world where there is access to the internet. 


Traditional banks see transactions being limited to taking place during working hours. Crypto uses cryptography to secure an investment. This means that transactions can be completed at any time of day or night. 


Of course, with fiat currency, we see a physical token in the form of a coin or a note. These can be produced in unlimited amounts by the relevant government. With Bitcoin and other cryptos, there is no physical coin. It is a digital asset that is stored in a digital wallet. Unlike fiat currencies, Bitcoin can not be produced in unlimited amounts  – there will only ever be 21 million Bitcoin. 


Will ongoing adoption correlate to price?


With Bitcoin hitting a record high in November 2021, it is thought that this rise correlates with its increased awareness and adoption. What has happened, certainly over the last 12-24 months, is that Bitcoin has entered the mainstream. Its popularity has continued to grow and trends have shown influxes in overall prices across the market.


What we are now seeing is:


  • Institutional investors adding crypto to their portfolios
  • Bitcoin running out – although it is said that not all bitcoin will have been mined until 2140
  • There are a growing number of platforms allowing individuals to purchase, and trade, crypto
  • Mainstream companies, such as PayPal, entering the arena 
  • Global institutions accepting that cryptocurrencies are here to stay (ETFs have been approved in both Canada and Guernsey)


These changes have reached the point where they are irreversible. What this means for Bitcoin is that the volatility, that has previously been experienced, will become a thing of the past. The continued adoption of bitcoin brings the stability and security that many investors have been seeking.