Why will cryptocurrencies keep rising? - Ease of entry & less than 0.1% adoption
People love a good opportunity to earn quick money. They love to be able to invest into things. But doing that wasn't always easily accessible for the average person. You had to have either a lot of capital to enter, you had to go through a complex verification process that not many people were prepared to endure or you just didn't have any option like that in your country. Cryptocurrencies and their exchanges are changing all that - it's now easier than ever to enter this market and become an investor, trader, speculator etc. How will that develop over next few years?
The key driver behind the rise of cryptocurrencies today (not just bitcoin) is ease of entry. You can open an account at coinbase.com - the biggest and easiest exchange to start buying cryptocurrencies - and start buying them within a few hours. You don't need any massive minimal investment amount. You don't need much - a photo of an ID and a scanned recent bill as proof of address. Compare that with for example schwab.com (one of the best companies to use for buying stocks, ETFs, index funds etc) - there's a $25,000 minimum investment amount for international accounts and you need to fill in a plethora of forms and send them over standard mail.
This process takes weeks if not months. Coinbase takes anything from a few hours to a couple of days (high interest in cryptos recently caused a backlog in account verification. But that's a temporary thing - more users = more profit = coinbase.com can hire more employees to help with verification. It will get better again.)
Anyone with an email address, an ID and proof of address can become an investor today.
It's never been easier to become an investor - a few steps to verify your identity and you can buy cryptocurrencies. Doesn't matter what you do with them - hold for years or trade, you have added some value to the entire market.
This is confirmed by the fact that Coinbase was getting over 100,000 new customers a day in early december 2017. That is an incredible growth - made easy by lowering the requirements to join. You can start with any amount - have $50 to play around with cryptos? No problem - it's ok, you can do that. The UI is easy, you can click a few buttons and purchase bitcoin, ethereum or litecoin with your card or bank transfer. PayPal is accepted on some exchanges - you don't even need a bank account to get started. You can find ATMs to buy bitcoin - then you can enter pretty much any exchange and buy other cryptocurrencies. Or you can exchange bitcoin for cash in person. The ways to buy bitcoin are growing each month.
This means, that many more people will try their luck with cryptos = many more cryptos will be bought (even if each of the 100,000 customers per day buys $5 worth of cryptos - that's +$500,000 to the crypto market cap (total size / worth of the market in f.e. dollars) per day. Let's halve that to get some kind of average estimate = $250,000 daily x 365 = $91,250,000 pouring into the cryptocurrency market per year. With more media coverage and new, simpler ways being created, this number will keep rising for several years.
Facts to think about:
- Coinbase had over 13 million user accounts at the end of november 2017. (Some of which could be empty or unused, but it's still a huge number). Of course, they are only one of many (125+) exchanges that exist today.
- There are 21 million bitcoin wallet addresses with at least $1 of value as of the time when I'm writing this. This doesn't include other cryptocurrencies - although if you were starting during or before 2017, you probably go for a bitcoin wallet first.
- around 90% of world population is above poverty limit = around 6,8 billion people as potential cryptocurrency users /buyers / investors / speculators
- around 3,8 billion people have access to the internet - narrowing down to a more accurate potential cryptocurrency user base (not everyone has the knowledge / skills to do it, but same goes for using banks or PayPay - you don't need to know how it works to use it. And as we mentioned above - ease of entry is much better than with banks or other forms of value exchange)
Where are we today? 21 million bitcoin wallets / 3,8 billion people = 0.06% coverage / adoption.*
This means it's still early days - baby steps for cryptocurrencies. Imagine where their price will go at:
3% adoption = 114 million wallets
5% adoption = 190 million wallets
10% adoption = 380 million wallets
25% adoption = 950 million wallets
50% adoption = 1,9 billion wallets
If, at its peak, Coinbase was getting 100,000 customer per day, that would make about 3,65 million per year - still only 0.09% adoption increase per year. Plenty of more room to grow.
Although bitcoin has risen steeply to crazy price levels, the actual adoption is still minimal - only 0.06% of people who can use cryptocurrencies are actually using them. With the coverage in the media, ease of access and good gains, there will be an influx of new buyers for years to come. Even if there's some hacks, bugs etc - the potential and benefits are too great for people to stay away. Same as with fiat currency when it started - banks were robbed, but that didn't stop people from using them. This continuous influx of users will ensure that the prices of cryptocurrencies will keep growing - each at its own rate, some will fail, but most will keep growing. The top 10 cryptocurrencies don't have many reasons to fall in value in the long-term at the moment. You can't go wrong with investing a smaller portion of your portfolio into cryptocurrencies - wisely.
Of course the number of wallets / users and the value of any cryptocurrency isn't directly correlated, but it's hard to argue against rising cryptocurrency price with doubling or even more-fold increase in number of users. It will eventually stabilise, but considering it's still early days and the very low adoption percentage, it won't stabilise that soon - a few years at least.
BONUS - according to stats on coin.dance, bitcoin owners are 96% male! Guess there's more male nerds than female nerds then.
What do you think? Do you agree with my logic / numbers?
I write more stuff like this on www.blockchainwisely.com.
*of course 1 user can have multiple wallet addresses but for simplicity of this calculation, it's ok to ignore that - it's not about a very accurate number, but about a rough estimate - which is still very low - to show the potential for growth