May 8, 2024

How Early Are We To The Bitcoin Revolution?

The excitement in the market is palpable. Everyone wants to be an early adopter, but the big question remains: How early are we in the Bitcoinization process?

How Early Are We To The Bitcoin Revolution?

Bitcoin, hailed by supporters as the future of finance, offers a multitude of benefits. Operating without a corruption-prone central authority and having a supply cap that makes inflation impossible, bitcoin is groundbreaking.

The excitement in the market is palpable. Everyone wants to be an early adopter, but the big question remains: How early are we in the Bitcoinization process?

Market Capitalization

Satoshi Nakamoto mined the first Bitcoin block in 2009, and with us now in 2023, we are currently 14 years into the Bitcoinization process.

The current market capitalization (the coin price multiplied by the total number of coins issued) is over $673.7 billion.

As of November 2023, it is the 12th most valuable asset by market cap, just below Tesla and well above VISA in 14th place.

Source: companiesmarketcap.com

This impressive feat indicates that bitcoin has grown substantially and evolved into an established heavyweight asset.

However, it's crucial to note that Bitcoin has yet to reach the market cap of silver, let alone gold, the most valuable asset on Earth.

Since Bitcoin competes with assets like silver and gold, rather than traditional company stocks, it still has a considerable distance to cover on its journey towards achieving global reserve currency status, a key aim of Bitcoinization.

Institutional Adoption

In 2022, approximately 8% of all bitcoin was held by governments and companies worldwide, a number that has likely increased since then. MicroStrategy leads the way among public companies, with bitcoin holdings totaling 158,400 BTC.

El Salvador stands out for its governmental adoption, having declared bitcoin legal tender in 2021.

A bitcoin spot ETF is still in the cards, and history has shown that such an opportunity can trigger an influx of investment, driving up bitcoin's price, market cap, and appeal to investors, institutions, and the average person alike.

Bitcoiners disagree on the significance of institutional adoption within the broader Bitcoin revolution. After all, Bitcoin's essence lies in empowering individuals rather than serving as a new asset class for investment bankers to exploit.

Nevertheless, it's important to acknowledge the role of institutional adoption in building trust and fostering broader Bitcoin adoption.

For now, we are early on in this process.

Regulatory Clarity

For bitcoin to achieve global adoption at the individual and institutional levels, clear regulations must be adopted in each country and internationally, which are currently lacking.

The matter is further complicated by bitcoin being included or excluded from wider crypto regulations across the world, with no agreement about its status.

The United States, for example, considers bitcoin a commodity, while cryptocurrencies are viewed as securities, creating a clear distinction between bitcoin and the broader crypto landscape.

On the flip side, the European Union categorizes them all as "crypto-assets," and some countries, such as China, have banned them outright.

As long as global regulations remain uncertain, the average person is likely to hesitate when investing in bitcoin, especially when considering transitioning from reliance on fiat currencies to reliance on bitcoin.

Merchant Adoption

Quantifying the number of merchants willing to accept Bitcoin for their products and services can be challenging, as the data often encompasses various cryptocurrencies. Nevertheless, there is clear evidence of growing merchant adoption across the globe.

In El Salvador, where bitcoin is legal tender, all merchants are legally obligated to accept it as payment.

In economically developed regions, highly integrated payment systems have reduced the incentive for individuals to adopt bitcoin as a currency. However, in parts of Africa where financial services are less accessible and local currencies are less stable, bitcoin has been embraced to such an extent that some local ecosystems rely exclusively on it. 

The role of fiat currencies and traditional finance in a Bitcoinized world remains a topic of debate among Bitcoin advocates. Nevertheless, it is undeniable that the growing merchant adoption of Bitcoin is a crucial indicator of progress in our journey toward a Bitcoin-led monetary system.

Currently, the data reflects what we would expect — Bitcoin adoption is more advanced in less economically stable parts of the world.

The Verdict

The most encouraging sign of progress in the Bitcoin revolution is its market capitalization, which has surpassed $500 billion, a significant milestone.

However, the other indicators suggest that there is still a long way to go.

Governments have yet to embrace bitcoin as a reserve asset, often opting to sell off their holdings for fiat currency when profitable. In the realm of public companies, none come close to MicroStrategy, which holds more bitcoin than all others combined (although the U.S. Treasury has more from confiscations).

Global regulatory clarity remains distant, with no internationally agreed-upon definition for Bitcoin's asset class. To establish Bitcoin as a globally significant asset, and particularly as the global reserve asset, regulatory clarity must evolve significantly.

Merchant adoption is more of a lagging indicator. It will catch up with the others as they progress, and right now, it is largely confined to parts of the world with limited access to stable financial services.

In summary, we are still in the early stages of the Bitcoin revolution, with substantial progress needed for Bitcoin to become a widely accepted store of value, unit of account, and medium of exchange. What's heartening is that the progress has been consistent and shows no signs of slowing down.

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