Bitcoin and Institutional Adoption
Bitcoin has seen immense popularity since its inception, even more so in recent times fueled by growing speculation, media hype, investment opportunities, and rapid rate of adoption. But long-term investors and financial analysts have been cautious about its meteoric rise to fame since the digital currency is neither backed by any physical commodity nor supervised by any central entity. Since the price is adjusted purely as a result of supply and demand, some analysts have predicted bitcoin could be as good as worthless in the next few years while other analysts have mentioned that bitcoin would continue to rise further and may even hit the value of $100,000.
One way bitcoin’s value could be saved from eroding is the financial adoption of bitcoin by mainstream institutions and corporations. Being widely used by these entities would make it less likely for bitcoin’s value to drop and encourage further adoption and popularization of the digital currency. Many institutions had been wary of bitcoin in the past but that attitude is slowly changing. Although they’re not fully adopting bitcoin’s use just yet, many of them are giving it serious consideration, embracing blockchain technology, or investing in more digital assets.
The sudden change in perspective regarding bitcoin by these institutions may be a result of the growing concerns that have plagued the traditional financial system since the turn of the century. That could be anything such as the slow domestic fund transfer times and even slower international transactional speeds. The variety of charges that are levied on transactions, especially high-volume or international ones. In a society where people have been accustomed to one-day deliveries and instantaneous communication over the internet, the slow and archaic nature of the financial systems feels unacceptable to many. These same slow times have impacted institutions as well and not just individuals.
Hence bitcoin and blockchain technology, although new, provides a viable alternative to banks and corporations. Utilizing them could cut transaction time by as much as eighty to ninety percent. Moreover, less manpower would be used on the backend of financial transactions and in completing new deals. The amount of time and manpower saved will be very beneficial for these banks and be used elsewhere more efficiently. So banks definitely have a huge incentive to drive the further adoption of bitcoins.
This might pose new challenges for investors, both individuals and companies alike. Hence it becomes imperative for investors to teach themselves about the various aspects of bitcoin and how the market might react to it in the future. There are various factors that affect the price and movement of bitcoin such as media attention, amount of new investors, etc. Companies like JP Morgan have dedicated resources to further explore blockchain and even created an altcoin based on their own name. This shows the belief these institutions have in the promise of bitcoin. And just because it is a cryptocurrency doesn’t mean it won’t have an inherent value, companies can back the value of their digital assets with US dollars guaranteeing their customers that their digital currencies will not go obsolete even in the worst-case scenario.
Paypal, the biggest third-party financial company in the world, recently announced their users would be able to buy, sell and hold bitcoins further driving up the value. President and CEO of Paypal, Dan Schulman, mentioned that the move to digital forms of currencies is inevitable that will bring with it a host of benefits and financial inclusion. It could also be used by corporations or the government to disburse funds to large amounts of people quickly.
Since Paypal is so widely used, bitcoin will most likely see further growth as people unaccustomed to cryptos begin to understand how they function and the various advantages they offer. The advantages do not come without their caveats, so it will also become important for people to take precautions and learn the risks associated with cryptos. Paypal plans to offer educational content to its users to deepen their knowledge of digital currencies, not just bitcoin but also cryptos such as ethereum, bitcoin cash, and litecoin. This massive move by Paypal to move into the crypto ecosystem could prove to be a massive boon for the bitcoin optimists. Just like how once the internet revolutionized communication across the world making it both cheaper and faster, blockchain could do the same to financial systems in the future.