Last week, Elon Musk, the world’s first billionaire influencer, changed his Twitter bio to #bitcoin, causing the price of the cryptocurrency to rise by about 20% and jump from $32,000 to $38,000 within just a few hours.
Earlier in December, Musk also teased the crypto community by tweeting “One word: Doge,” and the dogecoin price immediately rose by 25%. But while the latter was tweeted just for humor purposes, Elon Musk did go on record during a live interview on the audio chat Club House and revealed that he really is a firm believer in bitcoin and that the cryptocurrency is close to getting broad acceptance from conventional finance people.
He also added that he was late to jump on the crypto bandwagon and that he wished he would have bought bitcoin sooner, but he does believe in the potential of his “fav cryptocurrency.”
Although 2021 got off to a rocky start for bitcoin, and headlines once again baited the possibility of the bubble bursting after fears of a regulatory crackdown from the Biden administration, the cryptocurrency soon bounced back, prompting the question: is Elon Musk right? Is 2021 really the year when crypto finally gains widespread adoption?
Bitcoin has come a long way since it was launched in 2009, and last year marked a particularly important milestone in its adoption journey. Despite skepticism that it couldn’t handle the stress test of a global pandemic, bitcoin shattered all doubts and even grew its number of followers in the second half of 2020. By Statista estimates, over 63 million people had crypto wallets at the end of the year, and, interestingly, bitcoin adoption is spread across all layers of the population. According to a recent report, nearly half of bitcoin holders were 45 or holder, and 70% of females own crypto. Crypto has literally no barriers to entry, and it’s gaining traction in all age groups.
The World Economic Forum also estimates that, by 2022, 60% of the world’s GDP will be digitized, which means that crypto payments will move from a niche sphere into the mainstream, and benefits such as quick processing times, low transactions fees, and increased security will persuade users to ditch traditional payments.
Of course, such reports have been circulating for a while now, and bitcoin buzz hasn’t really stopped, not even when the currency was at its lowest. Ultimately, the most tangible proof that bitcoin is ready for mass adoption is acceptance from mainstream companies and conventional players in financial markets. In the past months, we’ve seen a lot of that, and there are signs that the cryptocurrency is moving forward.
Recently, companies like MicroStrategy and MassMutual have invested in bitcoin, and other major corporations have added digital currencies to their balance sheet as a safeguard against fiat currency inflation. According to finance experts, this is a sign that bitcoin is entering the fourth wave of adoption.
In the audio interview, Elon Musk also gave the example of PayPal. In October 2020, the online payments system provider announced that, starting January 2021, US users would be able to buy, sell, and hold select cryptocurrencies directly from PayPal and track crypto prices without leaving the app. When a major provider makes such a move, it’s bound to send ripples across the industry and encourage others to do the same.
Payment giant Visa could follow. On the company’s fiscal first-quarter earnings call, CEO Al Kelly said that Visa might add crypto to the payments network and allow users to purchase crypto with their Visa credentials. Meanwhile, rival company Mastercard announced that they would enhance the program for crypto card partners.
That being said, the list of vendors who accept bitcoin is still relatively limited, and although major companies are “normalizing” cryptocurrencies, it might take a while longer until everyone uses crypto wallets to do groceries and buy coffee.
Well, this is where your personal situation and risk preferences come in. Despite the wide acceptance, crypto is still somewhat controversial, and you’ll hear many conventional investors saying that you shouldn’t put your money into something so volatile. And, to be fair, in the short term, crypto can really seem volatile.
Take 2020, for example, a year when bitcoin has reported both the highest highs and the lowest lows. At this stage, this kind of volatility is to be expected, and if you’re not ready for that, then it would make sense to pass.
But if you’re able to resist clickbait titles about how the bitcoin bubble will burst every time the price drops, and you can focus on the bigger picture, then yes, crypto might be a great way to diversify your portfolio.
New investors can also check out review websites such as hedgewithcrypto that research cryptocurrency exchanges to find the best trading platforms in each country.
There are plenty of resources online that teach you how to manage your investment, not to mention social media sites such as Twitter that can provide insight into what other investors may be doing.
When in doubt, you can always follow Mark Cuban’s advice: only invest money that you can afford to lose, and be mentally prepared to experience some volatility.
To avoid stress, start with a small investment, and see how it goes. And last but not least, when following the news about crypto, try not to pay attention to doomsday scenarios and clickbait titles.
Instead, look at the applications of cryptocurrency, at the regulatory environment, and follow the tech innovations that make crypto easier to spend.
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