When will all people enter crypto?

In early 2018, Twitter CEO Jack Dorsey created quite the stir when he declared, “The world ultimately will have a single currency, the internet will have a single currency. I personally believe that it will be Bitcoin.” Mr. Dorsey also elaborated on the timeline, too, stating, “probably over 10 years, but it could go faster.”

Bitcoin predictions plucked out of thin air are rife. However, we must remember that Bitcoin does fulfill two core criteria:

• It’s built on innovative and new technology. Indeed, many governments are trying to leverage the blockchain tech Bitcoin is built on. In the United Kingdom, Housing Minister Eddie Hughes released a detailed report concluding that the country could save £8 billion a year by embracing blockchain technology. Proof-of-concept tests have already been carried out in the United Kingdom for processing benefits payments.
• Bitcoin derives value from network effects. The same is true of technology stocks like Twitter, themselves. Put simply, if Twitter had one user, then the platform would have zero value or utility. If you put two people on Twitter, people assign it more value; and if you add a third, it’s worth even more. The reason why social media platforms like Facebook, Twitter, and Snapchat are assigned billions of dollars in valuation is their big user bases creating network effects. The same is true of Bitcoin. If no one was using Bitcoin, then no one would assign any value to it.

In this article, we’ll examine if Jack Dorsey’s prediction could be correct and consider which triggers could result in higher levels of Bitcoin adoption.

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Could rising consumer debt levels lead to greater Bitcoin adoption?

Throughout the world, there are alarming warning signs that consumers are being overburdened with debt. During 2017, U.K. household debt surged to levels not seen since the 1980s. The difference between spending and income resulted in U.K. households taking on £25 billion in additional debt in 2017. That’s about a quarter of what the country spends on its national health service.

In the United States, consumer debt levels have hit peak levels. How much consumer debt is there in the United States? It’s estimated that this debt figure will reach a staggering $4 trillion by the end of 2018.

The United States and the United Kingdom are not unique examples. Nearly every country in the world is experiencing rapid rises in consumer debt levels. What we need to remember is that debt is essentially taking future cash flows (income) and spending them today. Consumer-credit fuelled growth cannot be sustained long term. At some point, the debt will need to be repaid.

How does this tie into Bitcoin adoption? If you are a believer in Keynesian economic theory, then you will believe that world governments should boost growth by increasing demand for consumer items. The stats for global consumer debt show that low interest rates have encouraged consumers to take on ever-increasing amounts of debt and have therefore artificially increased demand over the last decade. It is this artificial demand that has fuelled economic growth over the last 10 years.

However, interest rates around the world are beginning to rise again and consumer debt levels are already at all-time highs. What does this mean? It means consumer disposable income should shrink as consumers repay their debts. It’s this part of the credit cycle that usually leads to economic recession. That’s bad news for most businesses and the housing market.

That prompts the question, which assets typically make up the majority of a person’s total wealth? Usually, it’s housing, stocks, and pensions, typically invested in the stock market. All these assets usually fall in value during the economic recession. So, will people sit back and watch their net wealth fall? Or will they look for uncorrelated assets to hedge and attempt to preserve their wealth? It is in this exact situation where most people will be searching for an asset that acts as a store of value. If Bitcoin is truly digital gold, then it should benefit from increased net-fund inflows and increased adoption in these circumstances.