Bitcoin’s rise over the past decade has been nothing short of incredible. Yet, it has only been over the last couple of years that the cryptocurrency has really moved from the fringes of finance to mainstream acceptance. We’ve already seen some of the financial powerhouses start accepting Bitcoin for services and transactions, and more companies in the financial industry look set to join them in the near future.
So, as the overall support of Bitcoin continues to grow, will it pave the way for a new era in finance? In this article, we’ll explore some of the reasons behind the growing acceptance of Bitcoin.
Increasing distrust in fiat currencies
According to Ruchir Sharma, chief global strategist at Morgan Stanley Investment Management, one of the biggest factors behind Bitcoin’s growth is rising distrust in traditional fiat currencies, particularly the US dollar. In his opinion piece in the Financial Times, he stated, “The dollar’s reign is likely to end when the rest of the world starts losing confidence that the US can keep paying its bills. Money printing is likely to continue, even when the pandemic passes. Trusted or not, Bitcoin will gain from widening distrust in the traditional alternatives.”
Financial institutions buying as a safe-haven asset
As inflation concerns continue to mount, certain financial institutions are shifting some of their focus away from traditional asset classes like stocks and bonds and moving towards Bitcoin. Some consider Bitcoin a safe-haven asset like gold, which is why Bitcoin has grown in popularity recently to hedge against economic uncertainty.
Faster transaction times
It’s not uncommon for traditional currency transfers and payments to take many hours or even days when using a conventional bank. But, utilizing the rapid transaction speeds of blockchain, a transfer can be completed in a matter of seconds. Efficiency is becoming increasingly more important in the new digital revolution era, and Bitcoin acts as a great alternative for those seeking to process payments quickly.
Acts as a global currency
Part of Bitcoin’s growing appeal as a currency is that anyone from around the world can use it. Whether someone is from China, the US, or even India, they can all utilize the same Bitcoin. This not only makes payments more convenient, but also completely removes exchange rate risks. It’s for this reason that Citi analysts believe Bitcoin could become the world’s first choice currency for international trade.
It’s clearly advantageous for companies to adopt Bitcoin as a payment method. In the past year or so we’ve seen the likes of PayPal, Square, Mastercard and easyMarkets start accepting Bitcoin. Although the cryptocurrency is still yet to receive backing from any of the major banks, it does appear that it’s only a matter of time before more financial institutions evolve and begin adopting Bitcoin. Will that shift happen anytime soon? Perhaps. Only time will tell.