The crypto mainstream-ification intensifies

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Over the past year, Bitcoin has increased ~9x in value as corporate and retail investors have poured into cryptocurrency. In January, the crypto market hit $1T in total value (mostly Bitcoin). Now, the mainstream-ification is intensifying: Venmo-owner PayPal, which has a whopping 377M active accounts, officially launched "Checkout with Crypto" in the US, allowing users to pay with crypto at online stores. And in the coming months, PayPal will expand crypto checkout to 29M merchants. Customers with PayPal digital wallets can pay in Bitcoin, Ether, Bitcoin Cash, and Litecoin. This comes after Visa also announced that it'll allow people to use the cryptocurrency USD Coin (a US dollar-backed stablecoin) to settle payments.

How will it work?

Paying with crypto... but not really paying with crypto. Customers' crypto holdings will be converted into fiat currencies (like US dollars) at checkout. It's kind of like selling a fraction of your BTC, then using the sale money to buy a pizza. Merchants don't actually get paid in crypto — and that's way safer for them, since crypto is so volatile.

Will this help Bitcoin become the world currency?

As mentioned in a previous article, the fundamental problem for Bitcoin as a currency and as a way to pay for a pizza, or a Tesla for that matter, has to do with the very thing lots of people like about it—namely that the supply of Bitcoin is controlled and limited. Because the supply is limited, when demand for Bitcoin rises (because, say, people are convinced they can get rich quick by buying it), then the value of Bitcoin is going to rise as well. So, if you believe your Bitcoin is going to become more popular, then it’s foolish to spend it on a pizza or a car: you should hoard it and then sell it once its price rises. And since you can get along perfectly well without spending Bitcoin, there’s never been anything pushing people to stop hoarding. The more people hold onto Bitcoin, treating it as a speculative asset, the less appealing it seems as a currency.

The Takeaway

I don't see how Bitcoin can become the currency of use for Internet or the entire planet. For this to happen something probably has to go disastrously wrong with the institutions behind our current system — government backed fiat currency. That's a bold bet to make and I don't believe it will happen. I find it hard to believe Bitcoin will replace even weaker currencies.

Corporations such as Tesla and others are smart to invest and accept Bitcoin as a payment method. Bitcoin is a great hedge for inflation and its value is likely to continue to increase as more people hoard it. In my mind, BTC is still and will continue to be a speculative investment (not a currency) due to the following reasons: 
  • Given BTC's surge this year, most investors will see more potential upside in holding on to it rather than using it for purchases. 
  • BTC is too volatile for most to use it as currency, which is why PayPal is converting it (and why Visa is only allowing a stablecoin). It's also why Tesla — which now lets people directly buy cars with actual Bitcoin — has instituted a 30-minute purchase window.

Disclaimer: This post is merely my own assessment and is not an investment recommendation. For professional advice, seek input from a licensed investment advisor.

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