Cryptocurrency Still Facing Challenges Before Mainstream Adoption Can Happen
With widely used fintech platforms such as Square‘s (NYSE: SQ) App Cash and Pay Pal (NASDAQ: PYPL) allowing their tens of millions of users to buy, sell and hold bitcoin, investor interest in cryptocurrencies has skyrocketed. But what about ordinary Americans? Will people ever use cryptocurrencies as their primary method of payment for goods and services, or as a store of value?
On this November 30 fool live video, two of our financial sector experts speak. Hear what Matt Frankel, CFP, Fool.com contributor, and Jason Moser, Fool.com host Industry Focus: Finance, I have to say about what is hindering the adoption of cryptocurrency by the general public.
Jason Moser: But it also feels like there are challenges for crypto, at least in the short term. You mentioned it about general adoption. Now, maybe it’s clearing up, maybe over time, maybe this adoption as a medium of exchange, maybe it’s becoming a little more common. I don’t see a big reason today why I have to go to the store and pay for something with bitcoin. I mean, it just doesn’t seem like there is any real benefit, but I mean, given what we know today, given the small steps these companies have taken, it seems like the adoption by the general public right now doesn’t even matter.
Matt Frankel: Well, when it comes to general adoption as a currency, there are two use cases. There is adoption as currency and as historical value. As a currency, I see three main barriers to truly widespread bitcoin adoption. First, it’s very volatile. You don’t want to buy a type of currency that could be half or half the worse in a week. If you don’t think bitcoin could do this, look at some of the charts over the last few years, bitcoin going up or down by a few thousand dollars in a week. It’s another thing, volatility scares people off. Second, there are too many cryptocurrencies and it is easy to create a new one. When I was checking out just prior to our participation in the show, there are currently over 4,100 active cryptocurrencies. Most of them are not big, but there are a lot of big ones. There are more than 10 that have a market cap of $ 1 billion or more. There are many cryptocurrencies out there and it is quite easy for institutions if they wish to create their own. The idea of bitcoin at the start was a core currency. But if there are 4,000 floating around, it defeats the purpose. Third, as you mentioned, there are currently very easy ways to pay in US dollars.
Frankel: With a lot of these fintech innovations, I’m typing my wallet on a card reader in some places now and I could make a payment. US dollars are not that hard to use anymore.
Frankel: In my mind, for Bitcoin to be accepted by the general public, it has to do something that you can’t do with dollars. What I understand is that there are a lot of use cases for international money transfers and stuff like that, but between the volatility and the fact that there are literally thousands of them, and innovations in dollar-based fintech, I really can’t make it into mainstream use myself, but apparently a lot of people disagree as there is $ 359 billion worth of bitcoin in it. moment and now it’s over $ 19,000 apiece, so apparently if some people agree and buy.
Moser: Well, yes, one could certainly argue that there is a lot of speculation in this market. I would bet that a lot of people who speculate in the market don’t really understand how it works. I can’t just sit there and say I fully understand how this all works. My basic understanding, however, is that there is a fixed amount. There is a fixed amount of Bitcoin. If you have something that is in limited supply, it will obviously make a difference in dollars, for example, as we have seen, not limited in supply.
Frankel: That’s the big argument for bitcoin to be a store of value is that it’s essentially inflation-proof in that sense. US dollars, the government can always print more, which it does quite regularly, and with bitcoin it doesn’t. There is a finite quantity. As a store of value, that might make sense. But if that’s the big use case, then who cares if you can use PayPal’s merchants if it’s just store of value? Bitcoin could decide which direction it’s going to go, and I guess I can’t make a use case of owning bitcoin as a store of value over gold right now, and I can’t make a case for it. ‘use as payment over United States dollars.
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