2021 will be etched as the defining year when crypto went mainstream! At Coinsource we pride ourselves with having a team that not only is building the next generation of products to meet our user’s needs but are also avid contributors in the Web3 ecosystem. This said, we decided to interview a few of our crypto experts to gather their thoughts on 2021 and what they think is in store for 2022!
Throughout this article you’ll read a variety of responses from:
- Bo Oney – Executive Vice President of Operations
- Travis Gough – Chief Product Officer
- Jeremy Guzmán – Product Manager
- Sebastian Markowsky – Chief Strategy Officer
2021 was a breakthrough year for mainstream adoption in regards to the Crypto sector. What was an event that took place that stood out like that “eureka” moment for you that said: “Yeah, this is here to stay”?
There was not necessarily one moment specifically. If you were to look back at charts one or two years ago you can see consecutive growth and this growth stretches as far back as 2018. Within the short term, the market has experienced peaks and valleys, but when expanding to a broader picture we can clearly see an upward trend. Overall, there’s been more enthusiasm, more adoption, more people talking about cryptocurrency in personal conversations. One thing that can point to the growth is the institutional investment that was driven by the corporate sector and established businesses making big public investments in Bitcoin and other cryptocurrencies.
With crypto we’ve gone through multiple phases of “what’s the next hot topic?” There’s DeFi, Web3, NFTs, etc. The sentiment towards these things shifts depending on the market, and some of them are going to latch on and be successful. One thing’s for certain and the fact of the matter is that DeFi is here to stay. NFTs are here to stay. Web3 is here to stay. All of these markets will continue to experience exponential growth.
Two of the most significant “eureka” moments that really stood out, to me, both had to do with Bitcoin. These were:
(1) Microstrategy coming as a public company and going all-in on Bitcoin with their corporate treasury and then borrowing against their assets to be able to purchase even more Bitcoin. These tactics showed Microstrategy’s conviction in Bitcoin being a long-term store of value.
(2) El Salvador basically making [Bitcoin] legal currency and putting it on their balance sheet as well. Now we have a nation state that’s doing the same thing as Microstrategy. We will continue to see more & more countries do the same thing on a much smaller scale. However, the question these moments raise is: Where do you store your value these days? In my opinion, Gold has the most to lose in this scenario because people are shifting their store of assets towards Bitcoin specifically.
This is mixing with the recent inflation numbers where we’re seeing the highest inflation rates in the last 40 years – 6.8% off of their adjusted CPI level and the 10-year treasury is sitting at 1.5% over the next 10 years.
Historically, financial advisors would tell you to have a 60/40 plan where 60% of your assets are in bonds. If you put any of your assets in bonds and you’re only earning 1.5% you are essentially losing 5% of your purchasing power per year. The further we go down this road, we’ll begin to see massive institutions, pension funds, endowments and more pulling assets out of bonds and looking for other stores of value – eventually seeing more corporate treasuries and nation states putting Bitcoin on their balance sheets as well.
The “eureka” moment, for me, in regards to Bitcoin, would be Microstrategy’s push for adding Bitcoin to their balance sheet. From this moment, it solidified pre-determined projections I’ve had in which institutions would begin recognizing cryptocurrency as sound money – as a sound store of value. In the same vein, we saw the launch of Proshares Bitcoin Strategy ETF which served as a true transitory milestone moment for the crypto-space; exhibiting institutional interest in Bitcoin exposure. The downside of this product launch was the fact that it is Futures-based, meaning that investors will not be exposed to Bitcoin’s spot price, rather a discounted/premium price based on the month’s contract(s).
The second moment is within the DeFi & NFT space! We saw DeFi – which is short for Decentralized Finance – surpass the $100 Billion Total Value Locked threshold. This was a pivotal moment for the DeFi ecosystem because it places DeFi within range of the top financial institutions in the United States. For instance, after breaking $100b TVL, the DeFI ecosystem had an equivalent valuation as the 40th top U.S. bank – Synchrony Financial. Now this is just on the Financial Services front. Look over to NFTs and we’re seeing a huge wave of retail adoption. Nike, Adidas, along with other brands of consumer discretionary and staple items alike, have joined the adoption frenzy.
El Salvador was clearly this moment. A country making Bitcoin legal tender and the implications this may have on international trade, given legal tenders of countries, which may push other nations to accept Bitcoin in a wider economic context as well, is likely priceless and we only see the very early stages of this. Also a central bank of a country buying Bitcoin is a game changer. That this experiment then also creates the most successful financial inclusion project of all time and has a fair chance to change El Salvador and the behavior of their citizens in a very profound way is mind blowing and makes us excited to what 2022 may bring on the central bank front.
The Paypal news and Paypal integrating Bitcoin into their platform, where they will act like a quasi layer 2 protocol for Bitcoin was underrated. Its impact to mitigate some of the perceived flaws of the Bitcoin blockchain is very profound and may result in a leap of not only retail but B2B adoption.
Finally, Michael Sayler the CEO of Microstrategy has probably made the most impact on the institutional adoption of Bitcoin. His CEO Summit, where he helped corporate leaders make up their minds about why to think of Bitcoin, how to think of Bitcoin, and how to integrate anything Bitcoin into their organisation from a governance standpoint, will walk miles for the space in the years to come. Many voices also support the view that the change in adoption cycle from retail to corporate and institutional may catalyze a wave of ongoing adoption, which may change the way Bitcoin will behave from here forward.
Bitcoin is finally being accepted as legal tender and globally recognized as a hard, reserve asset. What do you think are the next steps needed for Bitcoin to become not only a store of value but a medium of exchange and eventually a unit of account?
There needs to be something done to the fees structure to make it a more appealing use-case in terms of the cost and speed it takes to use BTC as a payment mechanism. When you see this asset that’s continually growing exponentially and only gaining more and more in value, people are not motivated to use it as a form of value exchange or payment mechanism. In fact, the industry is saying that the psychology behind it is to hold onto it [Bitcoin] and use other forms of currency. True traditional currencies, Central Banks, etc. the kind that are created by nations as legal tender, to me, are going to always be the most widely adopted and most use case for payment for everyday transactions.
Simply put, we need more easy payment rails. The use of Lightning Network on Bitcoin has, in my opinion, been proven that it works and that it’s scalable. We’re seeing live remittances coming in through services like Strike, who are moving funds around the globe instantly at next-to-nothing costs on a layer 2 off of Bitcoin’s network. This will continue to scale as we head into 2022. In fact, what we need are more companies getting on board and collaborating with one another – onboarding new users and educating the market on why this is better than the current legacy system. People have talked about crypto disrupting the remittance industry for a long time and I looked at it 7-8 years ago and it just wasn’t ready. Now it’s ready for the mainstream and we need to onboard more companies and more cash-out points and connect all of those rails together. Once that happens we’ll see a shift happen very very fast.
Let’s start with the generational reception of cryptocurrencies – Bitcoin specifically. About 83% of millennial millionaires own cryptocurrencies (especially Bitcoin) – with 48% wanting to buy MORE! The key word here is Millennials; the upcoming generation that will replace baby boomers. This is rather precedent setting and makes one wonder: If Millennials are accumulating crypto en masse, imagine what Gen Zers are doing/holding! As said by Ray Dalio in a recent interview, the Younger Generation has accepted Bitcoin as an alternative to Gold.
In order for us to see Bitcoin become a globally accepted MoE, there’s a bunch of factors that come into play. In my opinion, one major catalyst would be if small & large businesses alike begin accepting Bitcoin as payment. El Salvador has already enabled Salvadoran citizens that ability through its government issued Chivo wallet. On a regulatory standpoint, once we’ve reached mass adoption in which Bitcoin is no longer recognized as Fiduciary money but rather as Legal Tender, then we’ll see Bitcoin mentioned more prominently in the medium of exchange conversation. Lightning Network is attempting to expedite this process by making Bitcoin’s network more scalable – transaction-wise. Tax regulation would also be a huge component in this SoV-to-MoE acceptance.
Bitcoin is the hardest currency on this planet. It currently has an inflation of 2%, which makes it the lowest inflation currency already today. With the next halving, its inflation will go below 1% – definitely making it the hardest money.
More Questions Coming Soon!
Stay tuned for part 2 of our 2022 crypto Q&A series, where we’ll address more questions on the future of crypto.
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