Are cryptocurrencies going mainstream?

Paypal's latest entry into the cryptocurrency space is another endorsement of the future of cryptocurrencies.
Many of the headlines read, "Cryptocurrencies are going mainstream."
You might think they've been saying that for years.
You're right, it is.
But given that Bitcoin is only 12 years old, they can't say it's too old.
In fact, we argue in this article that cryptocurrencies have gone mainstream.
Let's explain why we say that...

The first question we have to ask is, what does mainstream really mean?

"It describes what most people in society would consider 'normal'.
The mainstream is universal."

• Vocabulary.com

Is it common to own cryptocurrency?
Maybe it's not the right question, maybe it's not ownership that matters, but consciousness.
Apparently, 90% of Americans have heard of Bitcoin, compared with 93% in the UK and 66% in Europe.
If consciousness is a measure of asset going mainstream, bitcoin has arrived.

However, some people say that it is not awareness or ownership that matters, but regular use, or in the words of some, adoption.

Let's turn our attention to stocks.
I don't think stocks as an asset class are not a mainstream asset, because more than 52 percent of Americans own stocks in some form or another.

The actual percentage of Americans who own cryptocurrency, or rather bitcoin, is much harder to predict.
In various surveys, the figure ranges from 6.2 percent to 14.4 percent.
We think about 10% is more likely.
Clearly, this is a far cry from owning stocks.

While these percentages are only rough estimates, now let's look at the number of users, and I need to remind you that this is a more rough estimate!

The ownership of
While blockchains are transparent, the numbers they display do not help our investigation.
Take Bitcoin, for example.
Many wallets contain zero or very low amounts of bitcoin.
Also, many people have multiple wallets.
Worse, an estimated 23 percent of bitcoin is "lost."
This means that the data we are seeing about the number of bitcoin owners is somewhat misleading.

Two numbers that are common among commentators are that there were more than 54 million blockchain wallets and more than 30.4 million balance addresses in September 2020.
Estimates of ownership vary widely, from 13 million to 27 million.
However, the data is also fundamentally flawed because it ignores people who don't have wallets for bitcoin or other cryptocurrencies.
They buy cryptocurrencies through an exchange that keeps their coins in a centralized wallet.

Let's put these numbers in perspective.
Coinbase and Binance, the two biggest exchanges, have 45m subscribers.
There are an estimated 100 million bitcoin owners, including centrally held wallets.

Another interesting fact related to this.
You know what?
55.4% of bitcoin owners also invested in another cryptocurrency.
That means that most other digital currency holders already own Bitcoin.

On that basis, the figure of more than 100 million cryptocurrency owners is a reasonable estimate, and the US has the most cryptocurrencies.

Active users
Well, that gives you the number of cryptocurrency owners, albeit in an unsatisfactory way.
What about active users?
This is another possible indicator of whether cryptocurrencies have gone mainstream.

About three to half a million people use bitcoin every day.
Blockchain.info estimates there are an average of 550, 000 active addresses.
According to some surveys, only 8 percent of bitcoin owners hold electronic money as a payment tool.
The surveys suggest that most owners of bitcoin and other cryptocurrencies are long-term holders, who may be buying bitcoin out of "fear of missing out."
That's not a good reason for mainstream adoption, but it's a good reason for cryptocurrencies and, more specifically, bitcoin to have become a mainstream investment.
To prove it.
An estimated 11% of U.S. adults hold gold as an investment, while 14% hold Bitcoin.

Are cryptocurrencies becoming mainstream?
Based on our analysis of our preliminary estimates, we can conclude that Bitcoin is now a mainstream investment, with similar amounts to gold, which is a core component of the most diversified portfolios.

Most bitcoin is bought through exchanges and stored in a centralized wallet that is ultimately controlled by an exchange.
This is the perfect solution to overcome the main barriers to ownership and adoption of mainstream cryptocurrencies - security and hosting.
However, it is important that investors buy through regulatory and bonded exchanges rather than through non-compliant operations.

Near future
Interestingly, although adoption has been slow, it will only grow as PayPal enters the market and takes advantage of its 350 million users.
Still, Paypal is making waves in the market by joining the ranks of apps like Cash, with 30m customers;
EToro has a similar number of customers;
Revolut and Robinhood Crypto each have more than 13m customers, which offer cryptocurrency to consumers.
However, PayPal will have the biggest impact on the adoption of cryptocurrencies by allowing people to use their cryptographic assets to buy goods and services.

Coinbase will also roll out encrypted Visa debit cards next year.
Now, owners have an easy way to use their cryptocurrency holdings for day-to-day transactions.
It looks like Bitcoin and some of the other major alternatives (Ethereum, Bitcoin cash and Litecoin are accepted on paypal) are gaining mainstream acceptance.

It is women who are driving the future.
Only one in ten people currently own cryptocurrency.
Women, however, account for 70 percent of retail spending.
When women start to feel comfortable using cryptocurrency in their daily lives, then usage will increase.

The other side of the cryptocurrency equation
The debate we've been discussing about whether cryptocurrencies are mainstream, or not, is about more than just a small part of the cryptocurrency ecosystem.
We've been exploring its ability to store value and act as a medium of exchange.
But in other areas of the cryptocurrency market, such as the rapidly expanding decentralized finance or DeFi, DApp offers a variety of cryptocurrency lending opportunities and automated transactions.

In addition, there are other DApps that provide games, gambling and file storage.
These DApps are in the early stages of adoption, with the DeFi domain having fewer than 7,000 per day users and all DApps having 80,000 per day users.
While many DApps offer exciting risk opportunities, they are still a long way from becoming mainstream, although we believe they will eventually be.
Direct ownership of cryptocurrencies will also become mainstream in the next few years, but for now, it's still too confusing for the average investor, and the thought of losing your money will deter even the most adventurous.

The risks of mainstream adoption
Everyone says that scalability is a major barrier to mainstream applications.
To some extent, it is.
But with Paypal, it really doesn't matter if Ethereum or Bitcoin can handle only a dozen transactions per second, while Visa can handle 56,000 transactions per second.
The main risk remains its volatility.
Market volatility does not discourage speculators or holders, but it does deter those who use it to pay bills and buy coffee.
In reality, however, the more people who use cryptocurrency, or in this case bitcoin, the less volatile the price.
In the long run, we don't think volatility will affect the adoption of Bitcoin.

Other interesting developments
The currency etfs

The number of bitcoin owners in the United States could rise sharply if the Securities Exchange Commission approves exchange-traded funds backed by bitcoin.
Although they have rejected all applications so far, on the grounds that none of the proposals "prove that the bitcoin market is sufficiently resistant to market manipulation".
That day will come.
While the launch of a Bitcoin exchange traded fund won't affect acceptance, it will significantly increase the number of people who hold bitcoin as part of their portfolios.

Agencies are also getting involved

Paul Tudor Jones, the billionaire hedge fund manager who recently described bitcoin as "the fastest horse in the race", bought about $180m, or 2 per cent of the value of his fund (estimated at $9bn).
Following the massive acquisition, publicly traded corporate software company Microstrategy was revealed to hold more than $500m in bitcoin.
It won't be long before a lot of institutional money flows into Bitcoin.

Facebook's Libra

Facebook has announced its stable currency Libra in 2019 - a long time ago.
It caused such a stir that they quietly continued the project without much fanfare.
Facebook says it will not launch Libra until it has received all the necessary approvals.
In the face of this hot potato, they cannot afford the normal practice of "fast failure".
Libra's introduction will further broaden the cryptocurrency market and provide an alternative to other stable currencies.
However, even though Facebook has 2.7 billion users, that is no guarantee of success.
Libra may be destined for the same fate as many exciting projects take off.

Bitcoin myth
Investors in the new cryptocurrency generally believe that with a limited supply of 21 million bitcoins, the supply will be constrained as demand grows and prices are bound to rise sharply.
What these new investors don't realize is that there are 21 million bitcoins, but they are divisible by eight decimal points.
That means a single bitcoin is actually worth 100 million Satoshis(for comparison, 100 cents on the dollar!).
On that basis, if a bitcoin was worth 1 cent, it would be worth $1m, with a market capitalisation of $18.4 trillion.
By comparison, there are $1.2 trillion in circulation.
This lengthy explanation should give you the idea that the supply of 21m bitcoins is enough to support the lives of many people.

Who protects the interests of novice investors?
Finally, we have one more question.
All these companies are entering the cryptocurrency space with one goal in mind: to sell as many cryptocurrencies as possible, so who will protect the interests of consumers?

Take stock purchases, for example. Stock sales are based primarily on execution (i.e., no recommendations).
Brokers are regulated by the Securities and Exchange Commission, which means consumers are protected if they neglect their duties.
There is no such protection in the case of buying cryptocurrency.
While the same risk warnings apply to cryptocurrencies, as they do to stocks, there is significantly more complexity in the cryptocurrency market.
These include rampant price-fixing and dumping schemes and artificially high trading volumes reported by exchanges.
Why do you think the SEC hasn't approved a Bitcoin ETF?

So who's going to tell consumers about the risks, complexities and technicalities 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 think consumers should at least do their own research.
Many price forecasts come from vested interests.
The big exchanges are always trying to promote their other risky products.
Who can consumers trust to get fair and up-to-date information?