As Global Use of Crypto Accelerates, Demand Will Drive Prices Higher
Despite the current crypto winter, most crypto experts – including me, to be sure – expect a rebound in prices followed by new all-time highs much, much higher than November 2021 highs of $69,000.
The increasing pace of global adoption is one of the main reasons folks like me are convinced those highs are possible.
Insider Intelligence estimated around 34 million US adults owned crypto as of April 2022, and that’s a big number, but adoption is accelerating all over the world – even places that will surprise you.
In a February report, the Wells Fargo Investment Institute said that crypto adoption was following the path of previous disruptive technologies, such as the internet.
“There is a point where adoption rates begin to rise and do not look back,” the Wells Fargo report said. “Precise numbers aside, there is no doubt that global cryptocurrency adoption is rising, and could soon hit a hyper-inflection point.”
This matters because adoption is one of the key components driving demand. And rising demand leads to higher prices. This is especially true of market leader Bitcoin (BTC), which also features a steady, predictable decline in the supply of freshly mined coins.
And as any first-year economics student can tell you, falling supply and rising demand results in higher prices.
In the case of Bitcoin, supply cannot increase in response to greater demand. The code that runs the network cuts the block reward in half (events known as “halvings”) about every four years. Already the reward has been cut from 50 bitcoin per block mined to 6.25 now.
The network mines about 144 blocks per day (a block on average about every 10 minutes). So early on, that produced 7,200 new bitcoin per day. Now the network produces just 900 bitcoin per day.
Meanwhile, adoption rose from just a few thousand users to more than 30 million.
This is key to Bitcoin’s journey from mere pennies in 2010 to more than $65,000 last year. Even at today’s price of about $20,000, Bitcoin’s gains from 2010 are astonishing and unprecedented.
And yet this trend is just starting to amp up now…
How Supply and Demand Will Make You Rich
To get an idea of where we’re headed, let’s take a look at a chart of the immediate past.
Here’s a chart of the relationship between the Bitcoin price and user adoption growth that appeared in a recent report by Blockware Solutions:
The halvings will continue until 2140, when the last Bitcoin is mined. But global demand is poised to accelerate exponentially from here. Supply and demand will be moving in starkly opposite directions, putting incredible upward pressure on the Bitcoin price. And as we’ve seen over and over, the crypto markets consistently follow Bitcoin’s lead.
The Blockware Solutions included a chart for that as well, and it’s absolutely jaw dropping:
The orange line represents supply – the new Bitcoin generated by the miners. The green line represents the increase in demand – the sharp rise in global adoption as millions of new users hop aboard the Bitcoin train. It shows the percentage of the global population using Bitcoin from now through the end of the century.
Let me translate this into hard numbers to show you just how powerful this catalyst will be.
Supply first. As I said above, right now miners produce about 900 new bitcoins per day. But after the next halving in 2024, the new daily supply will be cut to 450 per day. The halving in 2028 will chop that down to 225 fresh bitcoins per day – a 75% drop.
That may not seem like much when you consider daily trading volume of is about 1.32 million BTC per day. But the drop in supply is cumulative and has more impact over time. If you have 900 bitcoins mined per day, that’s 162,000 bitcoins added over six months. In 2028 that six-month supply will be slashed to 40,500.
Now let’s look at the demand side. Blockware Solutions calculated there are about 30.8 million unique users of Bitcoin today – about 0.36% of the global population.
But Blockware Solutions sees a profound increase in Bitcoin users to 10% of the global population by 2030. Considering that the United Nations projects the global population to reach 8.5 billion by 2030, that translates to 850 million Bitcoin users.
So, we’re looking at a 27x increase in users over the next eight years as the amount of fresh Bitcoin falls by 75%.
This is why you see long-range Bitcoin price predictions of $250,000, $500,000, and even $1 million.
But you may be wonder just how likely it is that the number of Bitcoin or crypto users will explode as much as Blockware Solutions is predicting.
Not only is it likely, it’s already happening…
Crypto Use Growing Just About Everywhere
Global adoption of crypto has been percolating for several years, but really started to accelerate last year.
According to a research report published in April by crypto exchange and custodian Gemini Trust Company, 41% of those surveyed globally bought their first cryptocurrency in 2021.
But more noteworthy than the speed at which people are adopting crypto is where much of the adoption is happening. Most emerging economies are embracing crypto at a faster rate than most developed economies. Those folks are a key component of the adoption equation.
Last fall crypto research firm Chainalysis did an entire report on geographic trends in crypto adoption using metrics adjusted to reveal crypto use by ordinary citizens. Then they ranked every country.
The U.S. is ranked No. 8, but the surprise here is who outranks it…
Vietnam comes in at No. 1, followed by India, Pakistan, Ukraine (using pre-war numbers), Kenya, Nigeria, and Venezuela. Rounding out the top 10 are Togo and Argentina.
Another surprise is the high ranking of India, where crypto users have faced inconsistent and restrictive government policies – and yet continue to embrace crypto in large numbers anyway.
That’s even more true of China, which ranks 13th on the Chainalysis list. China’s strong showing comes despite repeated government efforts since 2014 to curb the use of crypto.
It’s worth noting that China and India combined are home to 2.85 billion people, more than one-third of the world’s population. That’s a lot of potential crypto buyers.
Among the buyers in smaller countries, one of the biggest motivations is inflation. The Gemini report said residents of countries that had seen domestic currency devaluations of 50% or more over the past decade were five times more likely to say they planned to buy crypto in the coming year. While no one likes inflation, it will drive millions of people to buy crypto.
But numbers only give you part of the picture. To truly grasp what’s going on, you need to look at a few real-world examples…
Where Crypto Adoption Is Happening Today
I could give you a much longer list of examples how crypto use is beginning to spread, but you only need these few to get the picture:
- Central African Republic: This landlocked African nation may seem an unlikely hotbed of crypto activity, but no one has told them that. Just weeks ago CAR announced its “Sango Project,” a plan to use crypto to tokenize the country’s natural resources. In April CAR legalized the use of crypto in its financial markets. CAR’s parliament also passed a law in April that outlined policies favorable to the growth of the crypto industry – putting it at least one step ahead of the U.S. Congress.
- Brazil: The largest country in South America is also embracing crypto in multiple ways. The country’s largest crypto exchange, Mercado Bitcoin, has 3.2 million customers – a figure equal to about 80% of the individual accounts active on the Brazilian stock exchange. Rio de Janeiro, Brazil’s second-largest city, is investing 1% of its treasury in crypto and plans to allow citizens to pay their real estate taxes with crypto starting next year. Last month the nation’s largest digital bank, NuBank, added an option for customers to buy and sell both Bitcoin and Ethereum. NuBank has nearly 54 million customers in Brazil, Mexico, and Colombia.
- Indonesia: According to the Gemini report, this nation of 275 million has one of the highest adoption rates in the world, with 41% of adults with an income of $14,000 or more owning crypto. It’s so popular there that Indonesian celebrities have gotten involved, with several launching cryptocurrencies that have gone viral. Indonesia also has a popular NFT platform, BOTX. Celebrity NFT collections usually sell out quickly. Major Indonesian businesses have also warmed up to crypto. A conglomerate named Sinar Mas created its own cryptocurrency, while the venture capital arm of a top government-owned bank, BRI Ventures, has been pumping money into crypto projects.
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