Bitcoin’s Future: Cash or Gold?

 In Adoption, Bitcoin, Countries, Education

Is Bitcoin destined to be the new currency or will it be a long-term store of value?

In February 2015, it was reported that the number of retailers accepting Bitcoin had reached 100,000. Most importantly, five of the top 500 leading internet sellers accepted Bitcoin as a method of payment. Those numbers were joyous news in the digital currency community; it meant that Bitcoin was growing in adoption and perhaps a future free of fiat currency was possible.

Fast forward to 2017 and the landscape has changed significantly. Bitcoin has seen a 55 percent increase in transaction volume, but the number of leading internet sellers accepting digital currency had dropped down to three. The explanation is likely that Bitcoin users are holding onto their coins due to their skyrocketing value rather than spending coins for daily transactions.

Fewer payment transactions and an increase in “hodling” (a Bitcoin community term for holding onto coins) has many wondering if the future of Bitcoin will be more like precious metals like gold rather than digital currency. The truth lies in both: Bitcoin will increase as both a store of value and as a decentralized payment system. Here’s why Bitcoin will thrive in both areas of value:

Cash: Japan Will Accept Bitcoin as Official Payment in 260,000 Stores

April 1, 2017, Bitcoin officially became a method of payment in Japan. Two major Japanese retailers partnered with Bitcoin exchanges to start accepting the digital currency as payment. That partnership proved to be only the beginning of Bitcoin in Japan. Coincheck, a Japanese exchange, partnered with Recruit Lifestyle which opened up 260,000 food establishments and retail locations nationwide to accepting Bitcoin payments.

Japan’s widespread adoption and acceptance of Bitcoin sets a precedent for other countries. As other governments consider how to approach cryptocurrencies, the success of Bitcoin in a leading country like Japan is likely to be influential. Allowing Bitcoin payments encourages commerce between Japan and other countries.

Furthermore, Bitcoin payments are low cost and faster across boarders than traditional payments. One universal currency that does not need to be exchanged and is not subject to exchange rates is inarguably valuable to all parties.

Beyond the borders of Japan, Bitcoin as a cash payment is of value to small business owners in the United States as well. Credit card companies typically charge 2-3% on every transaction. For small business owners in particular, those fees are a significant drain on cash flow. The margin of success for a small business to succeed is razor-thin with 50 percent of businesses failing within the first five years. Needless to say, every dollar counts to the small business owners across the country and exorbitant fees from credit card transactions is a problem (particularly in an increasingly cashless society).

Bitcoin and other cryptocurrencies typically cost between 0-1% for every transaction.  Small businesses can send or accept bitcoins as payments with no fees attached. Bitcoin doesn’t require a bank to verify each transaction, which means business owners don’t have to sacrifice revenue to financial institutions.

The number of leading internet sellers accepting digital currency had dropped, but it may be small business owners that lead the charge of adoption. The math of Bitcoin simply makes more sense for small business owners than traditional fiat currency. Having said that, there is a strong rumor that Amazon.com will soon begin accepting Bitcoin. Amazon.com being the giant that it is, acceptance of Bitcoin here could start the dominoes to fall for other major retailers.

Gold: Greater Adoption of Cash Will Make Bitcoin a Better Long-Term Investment

Bitcoin is not a game of either/or: ether Bitcoin is used for payment transactions OR it is a long-term store of value. In fact, Bitcoin growing in adoption opens up more and better business opportunities, increases the demand for Bitcoins – and, by extension, their price. The increase in price makes Bitcoin a better long-term investment for individuals and makes it more feasible for business owners to enable Bitcoin payments at their stores and brings other countless benefits to the participants of the market.

Japan’s mass adoption of Bitcoin as a payment system can be seen as the next step for digital currencies with businesses. Adoption of payment is driving up price, which has lead to many investors looking to take advantage of the long-term growth potential of Bitcoin. It is now legal to rollover traditional fund into a Bitcoin or other cryptocurrency self-direct IRA account. More and more investors are turning to digital assets for retirement.

The truth of the matter is that an increase in adoption of Bitcoin as a payment system will increase its value as a long-term investment. What’s good for one is good for the other.