A handful of cryptocurrencies such as Bitcoin and Ethereum have gained momentum and some acceptance on the market in recent times. They’ve come back to the fore of public discussions once again. This has been aided by several announcements of prominent hedge funds buying cryptocurrencies.
Mainstream media has also contributed to this renewed hype. Suddenly, Bitcoin and a few other cryptocurrencies are getting coverage from mainstream media. Several experts are expecting an explosion in value and popularity in the coming years.
Leading other cryptocurrencies is, of course, Bitcoin. Bitcoin was introduced in 2009 by Satoshi Nakamoto (pseudonym). It’s the most popular of all cryptocurrencies. As a result, its performance has a bearing on other cryptocurrencies’ overall performance with a smaller market share. Bitcoin currently enjoys around two-thirds of the market capitalization of all cryptocurrencies.
This makes its performance crucial in gaining market confidence as most people are mainly watching it as a way of gaining knowledge on the stability and acceptability of cryptocurrencies in general.
Whether or not the cryptocurrency will ever become the mainstream mode of payment depends on several factors. Let’s know about these things first. So, here we go!
1. Consumer Adoption Is Improving
Younger buyers are now adapting to the use of cryptocurrencies such as Bitcoin. The adoption is impressively picking up in pace. One is reminded of how the market eventually warmed up to technologies such as online shopping, touchless payment systems, or even the use of cell phones itself! Yes, cell phones haven’t always been the main mode of communication. They had to do quite some work to gain the mainstream usage they currently enjoy.
Big and well-respected companies like PayPal now allow you to buy and sell Bitcoin through their platform. While those like Square. Inc now accepts it as a payment method. VISA is also coming on board, with cryptocurrency exchange companies such as Coinbase offering a Visa debit card that allows you to make payments from your Coinbase Visa accounts.
The introduction of platforms to regulate marketplace fairness has also helped reassure consumers that Bitcoin and other cryptocurrencies are reliable reservoirs of value that they can bank on and accept payment.
2. Demand and Supplies
Bitcoin, a major player in the cryptocurrency world, is a currency with very limited supply when compared to the rate at which its demand is growing. Only 21 million Bitcoins will ever be able to exist. This coupled with the fact that of the close to 18.5 million Bitcoins already in “circulation,” only 8 million are actually available. The rest are held by long terms investors. This scarcity in a time of growing demand is bound to increase Bitcoin’s value, lead to more demand which can make it a gem as a payment method.
Limited supply for a growing demand is always a driver for value increase. On the other hand, paper money risks overprinting because, unlike Bitcoin, its supply isn’t exactly limited, which could make cryptocurrencies like Bitcoin more bankable than paper money.
If cryptocurrencies prove themselves over time against more widely accepted forms of payment like paper money, they could become accepted into the mainstream.
3. Constrains on Bitcoin Float
Even though there are currently about 18.5 million Bitcoins, not all of them are in circulation. Long-term investors are currently holding a large number. So, the actual number of Bitcoins in circulation is only around 8 million.
This further constrains the supply of Bitcoin and drives up the value of the cryptocurrency.
Trust is a factor that affects all currencies. People have to trust in the buying power of any currency for it to be able to trade on the market. For Bitcoin and other cryptocurrencies to continue growing in value and acceptance, this trust will also keep growing.
There’s a need for trust in the entire payment process. The concept of cryptocurrencies needs to be trusted. The underlying technologies and all the participants also need to trust in all components of the cryptocurrency to hold well on the market.
If the market maintains this acceptance, it could help Bitcoin continue moving beyond just acceptance by early market adopters. With Bitcoin, there seems to be great hope as big institutions such as Tesla express their trust in the coin by buying it in large numbers as an investment.
This is important because it helps reassure the public that the currency is stable enough to warrant investments in the billions by a company well-known for being technologically savvy. An endorsement like that helps position Bitcoin as the currency of the future.
There are a lot of factors at play when it comes to whether cryptocurrencies will ever grow to be a mainstream mode of payment. A look at the rate at which consumers are adopting major cryptocurrencies such as Bitcoin and Ethereum could indicate further future growth.
After all that has been said and done, the factor that decides whether crypto ultimately gains mainstream acceptance is trust. Can the public trust it as a currency? This currency has been growing, and there is reason to believe it’ll continue to grow if more trusted institutions continue putting their weight behind cryptocurrencies.