Bitcoin could be moving more into mainstream use.
Bitcoin keeps notching new highs, as do many of its crypto brethren. The latest rally, which has seen bitcoin soar to more than $48,000 per coin before backing off to a recent $45,000, has been largely been powered by tweets and, perhaps, the anticipation that prices will move still higher, which is the hallmark of speculation.
Elon Musk stands as one of the more “visible” names — a celebrity, certainly, in the business world and in crypto-land, who is using social media as a platform to drum up excitement for bitcoin and other offerings (even the “joke” coin known as dogecoin).
But beyond the speculations lies the very real question about what’s going on with “crypto beyond celebrity” – in other words, separating the wheat from the chaff, and examining the dynamics that are driving crypto as an economically viable alternative to, say, cash, cards or digital payments done using fiat.
The “viability” of crypto may have gotten a bit of a boost this week, when Tesla (headed up by CEO Musk) said it would (at some undefined point) accept bitcoin as payment. The company also disclosed that it had bought $1.5 billion in bitcoin to hold on its balance sheet.
In those two efforts, we see some glimmers of how bitcoin could become a bit more mainstream. If institutions hold more crypto on their balance sheets, beyond simply as a hedge against portfolios and as a vehicle to generate returns beyond those generated from cash, that’s an internal strategy to swell asset bases. But if they start to use crypto in B2B purchases, with an embrace up and down various supply chains, that might bring cryptos top of mind for executives, especially in countries where currency volatility is perhaps even more pronounced than what’s seen with cryptos.
To get there, of course, we’re seeing a bit more headway made with traditional financial services firms – where trust is still a key component of enterprise and consumer relationships. But there’s a key difference, which we’ll get to in a moment.
As of last month, there has been new guidance from the Office of the Comptroller of the Currency that federally chartered banks can use stablecoins for payments. Note that this statement applies to stablecoins, which have underlying asset values, such as currencies (the U.S. dollar springs to mind) – so the volatility that is seen in, say, bitcoin is not a defining characteristic. Stablecoins are seeing some uptake (as noted by J.P. Morgan’s own JPM Coin, and Circle’s USDC), and the OCC statement explicitly says that the stablecoins have to be exchanged for fiat currency.
Fiat, of course, is the operative word.
“Banks will likely see a commercial opportunity to launch their own stablecoins” and issuance could climb to $31 billion from last year’s $5 billion, Seamus Donoghue, vice president for sales and business development at digital infrastructure provider Metaco, told Bloomberg.
Tamping Down Volatility
As for bitcoin, and for cryptos in general — those not defined as stablecoins, with underlying “pegs” – volatility may be reined in by one key factor: “Mainstream” commerce can only be achieved when acceptance points proliferate. PayPal is giving users the functionality to buy and sell bitcoin – but the firm will also make bitcoin available as a payment method across tens of millions of merchants later this year.
Coinmap estimates that about 18,780 venues accept cryptos on-site — across merchants and ATMs – and there’s also an online component not reflected in brick-and-mortar locations. But the relatively low number speaks to low adoption rates thus far, as well as greenfield opportunity. One point of friction toward mainstream lies with the simple mechanics of bitcoin payments themselves.
In a recent interview with PYMNTS, Keith Johnson, general manager of Ternio, said bitcoin may not change the face of commerce itself (though there’s room for other cryptos to do so). He maintained that bitcoin transactions are expensive and can be slow. “For example, if you wanted to buy a cup of coffee with bitcoin, that transaction could cost you $20 (in network fees),” Johnson explained. The transactions require the blockchain to be updated with a number of confirmations, which takes time. Other cryptos and use cases may gain adoption (and speedy crypto to fiat interchangeability) as through partnerships seen in recent months and more still to come (such as Ternio’s Visa partnership, which is focused on crypto enablement).
Right now, of course, bitcoin and its peers are still trading vehicles — but as acceptance points grow, so may use cases beyond speculation and celebrity tweets.
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