Why is Bitcoin still being adopted by many parties even though its price has been halved?

Since 2022, the crypto market has continued to be turbulent, and the price has fallen by more than 50% from its 2021 high. However, the price cut does not seem to have affected the adoption of Bitcoin. There are still some exciting developments in cryptocurrencies in redefining ownership and value transfer.

Crypto adoption is not new

The adoption of cryptocurrency in everyday life is not something to be feared or unusual. Data shows that cryptocurrency users are growing at a rate of over 100% per year. This is far greater than the adoption rate the internet saw in the 1990s and early 2000s. If this adoption rate slows to 80%, cryptocurrency will still reach 1 billion users by 2024. This means that one in every eight people on the planet will interact with or use cryptocurrency in some way.

Cryptocurrencies, especially Bitcoin, have exploded in popularity since late 2020 after the pandemic began. In early October 2020, Bitcoin was worth just over $10,000. It then surged to over $60,000 a few months later. Last year was a big year for Bitcoin and other cryptocurrencies. Bitcoin peaked at $69,000 in November.

Meanwhile, a survey conducted by the Federal Reserve in October and November last year found that 12% of adults use or hold cryptocurrencies, including Bitcoin. At the same time, more than one in ten American adults have invested in or traded cryptocurrencies in the past year. As digital asset investments become more popular, these data may be the most authoritative data on the level of cryptocurrency use in the United States.

But its value has since fallen. As inflation hit multi-decade highs earlier this year and the Federal Reserve began raising interest rates, investors began fleeing the cryptocurrency market in favor of less risky assets. Bitcoin is now worth about $30,000 — having halved in value in just a few months.

Despite the recent price decline, the Federal Reserve survey shows that people are increasingly accepting cryptocurrencies as an investment vehicle. They are also increasingly accepted by institutions, with Goldman Sachs becoming the first major bank in the United States to trade cryptocurrencies over the counter. Ray Dalio's Bridgewater Associates also said it plans to support its first cryptocurrency fund.

In addition, the adoption of crypto continues in 2022. Since the beginning of this year, there have been increasing instances of crypto payments. French luxury brand Balenciaga said it will accept cryptocurrency payments in the United States, and its website balenciaga.com, Madison Avenue in New York, and designated stores such as Rodeo Drive in Beverly Hills will provide cryptocurrency payment methods; Tag Heuer, a Swiss luxury watch brand under LVMH, announced that its official website in the US market will support 12 major cryptocurrencies and 5 stablecoins as payment options, and will soon allow more digital currency payments; luxury brand Gucci began accepting cryptocurrency payments in some stores in the United States in late May, and plans to expand the pilot to all its North American direct stores this summer; Bentley University in the United States accepts tuition payments in BTC, ETH and USDC; Singapore restaurant Maison Ikkoki accepts BTC, ETH and BNB payments; global yacht activity brand Camper&Nicholsons accepts BTC payments; Dubai companies accept cryptocurrency as a future payment method...

Expanding financial services to developing countries

It is worth noting that the Fed's survey showed that although 12% of adults use or hold cryptocurrencies, including Bitcoin, only 3% of adults use them for financial transactions. The study shows that people who use cryptocurrencies as an investment tool almost universally use traditional banking services and have other forms of retirement savings. The demographic characteristics of the small number of people who use cryptocurrencies for financial transactions are very different, including those who have an average income far lower than those who only use cryptocurrencies for investment. Those who use cryptocurrencies for transactions are also more likely to lack bank accounts and credit cards than ordinary adults. This also reflects that one of the advantages of Bitcoin is that it does not rely on any intermediaries. It provides conditions for financial participation for users who lack bank accounts and credit cards.

Previously, the President of El Salvador said that 70% of Salvadorans do not have bank accounts, and the move to use Bitcoin will open financial services to these people. In addition, in countries such as El Salvador, many people's lives are highly dependent on remittances from expatriates. In El Salvador, remittances from expatriates account for 20% of the country's gross domestic product (GDP). Expatriates usually remit money to the country through a bank or other financial service provider, but these intermediaries can push up the cost of cross-border remittances. Therefore, Bitcoin may be more attractive to some poorer countries and individuals who want to avoid such charges. As a result, El Salvador became the first country in the world to adopt Bitcoin as legal tender last year.

Nigel Green, founder and president of financial consulting firm deVere Group, expects more developing countries to follow El Salvador's lead.

On May 18, as the host of the annual meeting of the Alliance for Financial Inclusion (AFI), Salvadoran President Nayib Bukele is also ready to promote the use and adoption of Bitcoin to 32 central banks and 12 financial officials representing emerging economies, including Paraguay, Haiti, Honduras, Costa Rica and Ecuador in Latin America; Angola, Ghana, Namibia and Uganda in Africa; Bangladesh, Palestine and Pakistan in Asia.

Moody's data shows that the use of cryptocurrencies is highest in countries with lower ratings; the use of cryptocurrencies will be higher in countries with weaker macroeconomic frameworks and those evading capital controls; cheaper and more reliable Internet data, mobile phone use, and increased digital trends will also drive the use of cryptocurrencies. However, Moody's reminds that the adoption of cryptocurrencies increases the macro risks of these sovereign countries, and the rapid popularization of cryptocurrencies may lead to excessive financial fragmentation of the payment system and weaken financial stability.

The embodiment of ownership value

Humans are wired to get caught up in the hype of narratives. We see this in politics, personal opinions, and society. Markets are no different. In fact, it happens even more in cryptocurrencies.

There’s no denying that the hype around crypto is attracting people to the space. With institutional interest, the rise of the NFT market, and the entry of new retail investors, we’re seeing waves of new support pouring into the crypto space. As much as we’d like, these numbers can’t rise forever, and there will always be pullbacks in a healthy market. But as crypto adoption increases, these cycles will move beyond the current four-year cycle and into a larger macroeconomic cycle (10 years), and crypto market volatility will no longer be an issue.

Cryptocurrencies are more than just a payment method, they provide a trustless, decentralized, and immutable value transfer system. Trustless — not relying on any third party to ensure the functionality of the protocol; Decentralized — no central point of failure. That is, data is not stored on a single computer that could crash the system; Immutable — cannot be changed; no one can alter the data.

Based on this, its value means more than just money, it can represent many things, from a house to a work of art to the right to own something. Cryptocurrencies (and new concepts like NFTs) are bringing a different type of value to the world. Blockchain systems allow this value to be transferred, stored, and recorded on a verifiable ledger.

This means that individuals can control their cryptocurrencies and fully own their blockchain-based assets. They do not need to rely on banks, lawyers, or any other centralized entity to gain ownership.

When looking at the future of the market, it is difficult to pinpoint exactly how far cryptocurrencies will develop, but we can identify what problems they solve and what value they bring, so that we can better understand why the adoption of the crypto market will continue to expand.