Cryptocurrency is suddenly everywhere – except in the cash register

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Billionaire tech executive Michael Saylor has called bitcoin “the seminal invention of the human race.” Its website describes it as “a bank in cyberspace” offering a “simple and secure savings account to billions of people”. He recently claimed ownership of 17,732 bitcoins worth around $740 million.

But one thing Saylor can’t do with bitcoin is pay for the $18 shrimp cocktail at Tony and Joe’s Seafood Place several stories below his penthouse apartment on Washington’s Georgetown waterfront. Although Tony and Joe’s have an ATM that can convert money to bitcoin, the restaurant won’t accept it.

“I would take Monopoly money before I take cryptocurrency,” said one official, who declined to be named.

Nearly 30,000 bitcoin ATMs now dot the US landscape at gas stations, liquor stores and barbershops, up from 1,800 four years ago. About half of Coinstar’s 17,000 kiosks, which convert coins to cash, now sell bitcoins. And consumers have a growing array of options to buy, sell and transmit digital currency, including popular payment apps like Venmo and Cash App.

Culturally, cryptocurrency is poised for even greater ubiquity: Last month, the Staples Center in Los Angeles was renamed Crypto.com Arena as part of a $700 million deal by the crypto exchange -currency based in Singapore. The Miami Heat are now playing in FTX Arena, named after another crypto exchange. And the two companies plan to run ads during next month’s Super Bowl, which can draw 100 million viewers.

But despite all the hype, there is little evidence that digital currencies are on the threshold of some kind of mainstream breakthrough. While a recent Pew Research Center survey found that 16% of Americans have used cryptocurrency in some way, most are buying it as a speculative investment, not for the purpose originally intended. – as a means of paying for goods and services.

“That’s not happening,” Dan Dolev, fintech analyst for Mizuho Securities, said of the idea of ​​crypto replacing cash. “I wouldn’t even try to quantify it because it’s so insignificant. People buy crypto because they think it can only go up. Or because they’ve heard it’s the future. Or because they don’t know why they buy it.

Within bitcoin, the original and still most important cryptocurrency, only a tenth of transactions represent “economically significant” activity, according to an October study by the National Bureau of Economic Research. And of this slice, the study concluded that traders aiming to buy low and sell high accounted for the vast majority of moves.

For some bitcoin backers, that’s fine. Saylor, one of Bitcoin’s most vocal evangelists, declined to comment for this story. But elsewhere, he said he views the digital token as a gold-like asset, meant to be bought and held, not used as an alternative to the dollar.

“You really don’t want to pay for your coffee with your bitcoin. You want to pay for your coffee with currency,” Saylor told CoinDesk TV in a recent interview. “I don’t really think it makes sense to pay for things with an appreciating asset. It makes sense to pay for things with a depreciating currency.”

Saylor ranks among the “whales” of bitcoin, a class of extremely wealthy investors who control an inordinate portion of the asset. In addition to his personal holdings, Saylor’s company, enterprise software maker MicroStrategy, invested his corporate reserves in bitcoin and borrowed to buy more; it now holds approximately $5.2 billion in digital currency.

Indeed, the top 10,000 individual bitcoin investors own about a third of all digital tokens in circulation, according to NBER research, a greater concentration of wealth than exists with dollars among the wealthiest US households. In the second quarter of last year, transactions over $10 million accounted for more than 60% of activity in the growing decentralized finance market, the crypto alternative to traditional financial services, according to a report by Chainalysis. .

As the global crypto market has exploded in value — tripling in the last year from $774 billion to $2.2 trillion, according to CoinMarketcap — it has attracted a larger chunk of the population. The 1 in 6 Americans who say they have invested, traded or otherwise used cryptocurrency is an increase from 2015, when just 1% said they were involved, according to Pew.

And today’s investor base is increasingly diverse. A poll conducted this summer by NORC at the University of Chicago found that 44% of those who bought or traded cryptocurrencies in the past year were non-white, 41% were women and 35% had an annual family income of less than $60,000. The survey also revealed that the average participant was under 40 and did not have a college degree.

For some established companies looking to get in on the action, this may be the only proof they need that there is a future in digital cash.

Block CEO Jack Dorsey, a co-founder of Twitter who recently left the social media giant, predicts bitcoin will replace the dollar and become the world’s “single currency” within a decade. (Square, which provides e-commerce and banking services to sellers, announced in December that it was changing its name to Block.)

Block is acting accordingly, allowing people to buy and sell the digital currency through its Cash app. The company is also pursuing a number of initiatives focused on expanding the decentralized system on which bitcoin is based, an effort designed to “help bitcoin reach a mainstream audience,” Dorsey told analysts on the latest call. to the company’s results in November.

The thrust starts from a modest place. Bitcoin transactions on Cash App have increased over the past two years, the company said. But crypto transaction fees accounted for less than 4% of the company’s gross profit in the third quarter. And bitcoin trading volume on the platform fell by about half from the first quarter of the year to the third, a drop that Wolfe Research analyst Darrin Peller attributed to consumers feel less greedy after spending or investing stimulus money. Bitcoin “has been very slow to gain consumer adoption,” Peller said.

More options for using crypto in day-to-day transactions could help. Payment giants Visa and Mastercard have both announced partnerships with crypto companies allowing banks and merchants to offer customers the ability to spend, invest and earn rewards in digital currency. Coinbase, one of the largest crypto exchanges in the United States, now offers a Visa rewards debit card that links users to their accounts on the platform; Crypto.com also publishes one.

But crypto’s path to broader consumer use hardly follows a straight line. Major national retailers that toyed with bitcoin acceptance through their websites in 2014, including Dell and Expedia, later dropped the option when it failed to win over customers. Tesla CEO Elon Musk, another bitcoin-loving billionaire, announced last year that the electric car maker would accept cryptocurrency as a form of payment. But it reversed less than two months later, citing concerns about the amount of energy used to mine bitcoin.

Meta, the parent company of Facebook, has faced its own challenges for its crypto ambitions. The social media giant sought to become a digital payments juggernaut in 2019, revealing plans to launch a cryptocurrency that would allow users to exchange money without transaction fees. But concern from federal regulators that the product could pose risks to the financial system has so far hampered the project. David Marcus, the executive in charge, left the company at the end of last year.

Consumers committed to spending crypto have options. Overstock, the online furniture retailer, has been accepting bitcoin since 2014. Other major national brands, including AT&T, Home Depot and Regal Cinemas, have partnered with crypto payment processors to offer this alternative to their customers. And some prominent charities, including the American Red Cross and the National Kidney Foundation, note on their websites that they are now equipped to accept crypto donations.

Even though the practical value of crypto remains uncertain, its enormous gains as an investment asset have proven irresistible to even some generally cautious investors.

In October, the Houston Firefighters’ Relief and Retirement Fund said it purchased $25 million in bitcoin and ether, the second most popular cryptocurrency. And two funds for workers in Virginia’s largest county are also taking the plunge: Fairfax County Police Officers’ Retirement System and Fairfax County Employees’ Retirement System are investing a total of $50 million in a Parataxis Capital Management fund, which buys digital currencies and crypto derivatives.

Elsewhere, top asset managers BlackRock, Fidelity and Vanguard are investing in bitcoin mining, the power-intensive computer networks essential to validating transactions on the decentralized network. And while Fidelity and Vanguard have yet to allow workers saving for retirement to invest their 401(k) funds in crypto, the industry could be headed in that direction: Over the summer, ForUsAll, a small 401(k) provider, announced a partnership with Coinbase that allows plan participants to invest up to 5% of their retirement funds in digital currencies.

Bitcoin is down around 40% since hitting an all-time high of around $69,000 two months ago; Ether fell by the same magnitude during this period. Bitcoin has a history of such volatility; last year, its price fell by half from March to July before rising again in the fall.

The industry itself, awash in newly created wealth, is spending heavily to promote the idea that crypto is safe bet, enlisting a string of celebrities to record TV commercials encouraging viewers to invest. Among them: Tampa Bay quarterback Tom Brady, who told the SiriusXM podcast “Let’s Go” in September that he “would love to ‘get some of his NFL salary’ in bitcoin or Ethereum or Solana tokens. “.

But an ad for Crypto.com featuring actor Matt Damon sends a slightly different message. After touting a series of adventurers throughout history as “those who embrace the moment and engage,” Damon gazes up at a spooky red planet in space.

“Fortune”, he says, “favors the brave”.


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