Real Bitcoin adoption is lower than many people think, which means it has a much higher potential upside than many think.
On March 9, U.S. President Joe Biden issued an executive order on digital assets. In response to the order, a senior member of the administration said that some 40 million Americans - approximately 16 percent of the population - are reportedly investing or trading crypto.
This official statement echoed the results of a report released by Grayscale Research in December 2021, which stated that 26% of Americans own Bitcoin (BTC). (Editor’s note: Grayscale is owned by Digital Currency Group, the parent company of CoinDesk). According to another 2021 survey from bitcoin investment firm NYDIG, 46 million Americans, or nearly a fifth of American adults, own bitcoin.
During conversations with other crypto professionals, I have heard people make statements like these about the "adoption" of bitcoin in the United States now being above 15%. In my view, this is significantly off the mark, perhaps by an order of magnitude.
What Bitcoin adoption really means
That’s because buying, say, $10 worth of bitcoin is not truly adoption, in my opinion. In order to adopt bitcoin, we must acknowledge its significance as the world's best hard-money asset - a monetary asset with limited supply. In other words, it means we should recognize bitcoin as one of the most risk-adjusted and liquid investment opportunities available today. By recognizing this, you realize that bitcoin is on its way to becoming the world's most valuable currency.
Based on such realizations, “adoption” doesn’t mean buying a little bit. It means putting a significant portion of one’s net worth into bitcoin. The Biden administration cited 16% or more of the population to own at least some crypto, including bitcoin, as evidence of adoption. Rather, it is the percentage of the population that has put 20% or more of its net worth into bitcoin.
Measuring adoption by this standard is difficult. Accordingly, the percentage of the American population that uses bitcoin is smaller - perhaps as small as 2%. But if bitcoin ultimately reaches its potential as the world’s best hard money asset, then its adoption by this standard could end up exceeding 50% in the long run.
Degrees of adoption
Furthermore, since bitcoin is a monetary asset, its degree of adoption can vary over time depending on the individual adopting it. Beginners can begin by buying $10 worth of bitcoin and leaving it on an exchange, and over time, they can move a larger portion of their savings into bitcoin as they learn more about it.
In this sense, it differs from most technological adoption processes, which are typically binary, such as owning a car (or maybe two) as opposed to none or owning a mobile computing device (or two) rather than none. By contrast, when it comes to bitcoin adoption at a personal level, it is a sliding scale between dabbling and committing significant amounts of wealth.
What this means for advisors
This has important implications for financial advisors. The idea of investing 20% of your net worth in bitcoin may sound outlandish, but it's already happening. In the last year, we reached out to numerous financial advisors who are building their businesses around bitcoin. Their clients aren’t allocating 1% of their portfolios to bitcoin – they’re allocating 10% to 30%. For these advisors, the cornerstone of their practice isn’t stocks, bonds, or real estate; it’s bitcoin.
Therefore, bitcoin is already advancing beyond the position of being the next Amazon (AMZN), according to some financial advisors. Today it's on its way to becoming something similar to gold or the S&P 500 - and possibly the largest asset class in a client's portfolio. Yet, the fraction of current and potential financial advisory clients who treat it this way is still small enough that it could grow dramatically in size this decade.
With an increasing proportion of the American and global population adopting bitcoins, I anticipate that financial advisors on the right side of this trend will reap rich rewards. Although it is not necessary to build a practice around bitcoin - yet - financial advisors would do well to find ways to ride the wave of bitcoin adoption. It’s just getting started.
People often use cryptocurrency mixers to keep their cryptocurrency transactions, private from mixing cryptocurrency funds with a wide range of other funds. The services are typically used to anonymize fund transfers between services without requiring to Know Your Customer (KYC) checks.