Bitcoin acceptance: multinational brands accepting Bitcoin as a payment
The cryptocurrency ecosystem recently witnessed a breakthrough when the world’s first and the most well-known cryptocurrency Bitcoin shot to record highs. Earlier this year, its price on trading exchanges broke all its previous records when it hit $60,000 per coin.
COVID-19, WORLD ECONOMY AND BITCOIN
Covid-19 proved fatal for the global society, the traditional financial systems faced the biggest setback in its history. Lockdowns all around the globe crashed the economy with only a few left to struggle for dear life. Owing to the pandemic, the businesses are struggling to overcome the aftereffects of the macroeconomic shock that resulted in market uncertainties, high inflation rates and traditional assets losing their values. Investors were constantly on the lookout for alternatives to secure the value of their assets. This directed them to invest in cryptocurrency Bitcoin which is known as a store of value and a hedge against inflation. Many analysts are citing it as the major contributor to the rally in the price of Bitcoin observed earlier this year. Many traditional investors are now stepping into the crypto ecosystem following the trail of many business giants. The sudden surge in investments began around August 2020. Microstrategy, a business software firm led by Michael Saylor, announced a purchase of 21,454 bitcoins worth $250 million. This was the first big investment in cryptocurrency and probably a game-changer. Bitcoin was struggling at around $11,000 as of August 2020 but the news about Microstrategy buying Bitcoins helped it achieve some new highs.
INSTITUTIONAL INVESTORS’ INTEREST IN BITCOIN
Later that year, news started pouring in when payments processor, PayPal announced that they are all set to enable its customers to hold, sell and buy Bitcoins and some other cryptocurrencies like Ethereum, Litecoin and Bitcoin cash directly from their digital wallet. Not only that, these virtual coins can be utilized in the purchasing of various products from the 26 million merchants that accept payments through PayPal. The payment processor attributed this smart move as a step towards increasing customer understanding of virtual money and consequently leading to the adoption of cryptocurrency. In order to do that PayPal will also provide educational content to account holders to better understand the crypto ecosystem. Bitcoin prices start rising alongside the news, crossing $12,000 on exchange charts. Towards the end of the year 2020, despite the pandemic, Bitcoin was on a continuous rise closing at around $28,000. This promoted widespread acceptance and trust in Bitcoin. The involvement of some popular companies in Bitcoin helped stabilize the virtual currency, which was depicted as a static rise and fall in the price as compared to the drastic crashes in the past. This attracted many other business executives to step into the cryptospace. The Year 2021 started off with Bakkt Holdings, LLC (“Bakkt”), the digital asset marketplace, announcing the launch of the Bakkt app. This app cum digital wallet intends to bring Bitcoin and all other forms of digital assets to one platform. Bakkt app was launched in partnership with some well-known brands including Starbucks, GolfNow, Best Buy, Choice Hotels, and Fiserv. This game-changer app can safely be considered as another attempt towards normalizing the use of Bitcoin and other digital assets. Bakkt app was launched to help utilize all digital assets, be it loyalty points, gift cards, reward points or Bitcoin from a single location; to amplify consumer spending, reduce payment costs, and boost merchant loyalty programs. Another big name in the race is Tesla, which recently announced that it will be accepting Bitcoin as a payment method. The list of companies accepting bitcoin is ever increasing. Wikipedia, Microsoft, Starbucks are amongst the list.
IS BITCOIN A DISASTER OR A SAFE HAVEN?
The economic uncertainty caused by the global pandemic no doubt diverted investor’s interest in Bitcoin investment, largely as an alternative asset. More and more investments are now pouring in and analysts have started labelling it as digital gold. Yet, Bitcoin’s status as a reserve asset or safe haven is still debatable. For an asset to qualify as a safe haven, it is expected to be stable or at least show small scale recession at times of market crashes. Unfortunately, that wasn’t the case with Bitcoin. As it showed remarkable recession along with other assets. Furthermore, the market cap of $3.38 billion is just not enough to render it a safe asset, as per Blockchain.com research head Garrick Hileman. While talking to Finance Magnates he quote, “Bitcoin need to hold a reliable value of more than $50k per coin to equate a total market value in excess of $1 trillion before being considered as a global reserve asset.” A rise in the market cap can also solve its volatility issue, a major demerit of Bitcoin. According to experts, the higher the market cap grows the lower its volatility gets, consequently resulting in more stable prices. While many think Bitcoin to be the digital gold, David Dorr, Co-founder of Coro Global Inc., is not convinced of the opinion. According to him, “in addition to its inability to have speeds competent enough to function as a medium of exchange, it has no barrier to competitive entry,” he explained to Finance Magnates. He further quoted, “gold is a physical element on the periodic table. There are only a handful of precious metals on the periodic table and unless a meteorite hits Earth and introduces a new precious metal to the periodic table there is a real physical limit to competing with those precious metals,” he said. “Bitcoin, while it might be limited in the number of tokens, has no barrier to competition. This is why there are now over 100,000 cryptocurrencies.” Another reason for Bitcoin’s debatable status as a safe haven is its investor base. Many retail traders used it for speculations, according to researches held until 2019. It’s very likely that these speculators will sell their coins during market stress leading to price instability. On the other hand, if it was held by long term investors, its trading history could have been very stable. One key challenge with Bitcoin is, it’s too early to form an opinion about it being a safe haven. Even highly stable assets perform differently in different market situations. This global pandemic was the first major crisis since Bitcoin’s introduction to the market. It would be unfair to judge its performance based on this pandemic.
However, as the virtual market is expanding with more investments pouring in, we can expect Bitcoin’s volatility, investor base and portfolio characteristics to evolve too. There is no doubt in the fact that Bitcoin has the potential to compete with gold as a safe haven, but for now, it would be too early to form such an opinion.
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