Crypto is becoming part of mainstream investments, payment platforms, and even asset protection with countries, corporations, and people.
November 9, 2020
By: Bobby Casey, Managing Director GWP
There’s no avoiding crypto any longer. The people are voting with their wallets and crypto is inevitable. Even governments are desperately trying to get on board the crypto bandwagon. Venezuela tried with Petro. Ecuador, Japan, Singapore, Estonia, Russia, and China all have launched or have plans to launch their own country backed cryptocurrency.
It’s a form of payment. And the more forms of payment a business accepts, the better. The more forms of payment that can be facilitated the better. Convenience is key. That could very well be the only distinguishing factor in some business models: how easy it is to work with you.
Crypto in general is less of a punchline and more of a topic of genuine interest, which shows a tremendous amount of mainstream growth!
Square recently bought $50 million in Bitcoin, for example. They’d been facilitating bitcoin purchases since 2018, but now a percentage of their corporate portfolio includes Bitcoin. By dealing in bitcoin, Square contends some barriers to entry into other global markets has reduced.
“Square believes that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system, which aligns with the company’s purpose.”
They aren’t the only payment platform opening up to crypto. PayPal says they are offering buy, hold, and sale of cryptocurrency as well.
Microstragegy is a software company that offers mobile and cloud-based services. Their CEO Michael Saylor, once a hardcore skeptic of Bitcoin, has since changed his tune. He personally holds 17,732 BTC, while Microstrategy holds 38,250 BTC.
The incredibly newsworthy piece in all that is, his company made more in the last two months off bitcoin than in the three and a half years Microstrategy has been in business.
We have by no means achieved full acceptance here as a common currency. Many of these big players see it as a hedge against the dollar… basically digital gold. You don’t spend it. You hold on to it and hope you never need it.
I don’t know if I agree with that, but time will tell. For now, it’s understandable that people refrain from dealing in regular bitcoin transactions. The transaction fees are quite high, and it might not be worth it. The costs shot up from $1 to $6.47 and back down to $2.73 just this summer alone.
It’s mainly supply and demand that drives these costs, but the higher the overall demand the higher the fees. The higher the transaction amount, the higher the fees. The greater the difficulty in mining, the higher the fees.
All of which are true of the bitcoin market of late.
As a matter of day to day transactions, does it make sense to pay that much? Not really.
But large multinational corporations are taking an interest in not just in existing cryptocurrencies, but in launching their own!
JPMorgan Chase has launched its own crypto: JPM Coin.
Walmart considers rolling out their own Walmart Coin.
Facebook launched Libra.
It would come as no surprise that Amazon has plans to roll out its own cryptocurrency.
Even if bitcoin itself doesn’t become a standard daily currency, the fact remains that both countries and businesses alike are taking to block chain based currencies.
Remember retailers already had gift cards. Places like Kohl’s and Old Navy have their “cash” that activates toward store purchases on certain days. Credit cards were already giving away credits like “miles” with their services. It stands to reason that they would make it official by offering a more secure and versatile means of payment.
The portability and convenience are key to why digital currencies are popular, but the privacy factor is the real distinction. Privacy is trust. Trust is faith. Faith is customer loyalty. One of the most solid selling points of bitcoin, aside from being first on scene, is the decentralized nature of it, and the level of privacy it offers.
This is one of the downsides of the other corporate and national cryptos: no assurances that their transactions will be kept private.
Why is this important? Government wants everyone fixated on “criminals”, but the reality is, “criminality” itself is often an innocent victim of onerous laws.
I think we know all too well what victimless offenses lead to: black markets. Government has people freaked out about “illegal” drugs and “illegal” transfer of funds. But no one is affected by it. Here’s one case of “criminal” behavior using crypto:
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Over $50 billion of cryptocurrency moved from China-based digital wallets to other parts of the world in the last year, according to a report by Chainalysis.
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Chinese citizens are only allowed to buy up to $50,000 of foreign currency a year at a financial institution.
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The report said this could point towards the possibility of Chinese citizens using cryptocurrency to move their money out of the country.
This is likely prompted by Trump’s trade war that weakened the yuan and Chinese economy. It all points to capital flight. People diverted their assets into crypto so they could mobilize when China was hit by the impending trade war.
That’s certainly one way to protect your wealth and assets from government, and safely offshoring it. If taxes are looming in a Biden presidency, this could explain why crypto is seeing such a huge surge.
Under a Biden administration, we will see economic refugees in need of a home. Crypto is a popular and easy mechanism. As more businesses and platforms start to accept crypto, people will turn to it as a safe haven.
Trust wasn’t only betrayed politically, but also financially. Politicians have been spending at steady clip and central banks have been keeping up with their printing. Worse still, many big tech services have betrayed their customers turning their information over to the government.
This is the part of the “new normal” people need to understand and get on board with. If you’re looking to protect your assets, tangible or otherwise, let’s talk.
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