At first, there was a lot of sceptics when it came to Bitcoin. A lot of people claimed that the digital asset was a ‘fraud’ or just some kind of wacky money for the internet. No matter what you think Bitcoin you can’t deny that it has played thousands of ideological and practical roles.
Even so, the single biggest argument in the Bitcoin community is over what day to day purpose the leading cryptocurrency could actually serve.
There are some enthusiasts that believe Bitcoin is a kind of ‘digital gold’ that should be held onto as a long-term investment. Then there are other fanatics that believe that Bitcoin is ‘digital cash’ which could be used as an everyday investment such as the weekly shop. Both sides of the argument believe that if their views were embraced by the rest of the world, the mass adoption of Bitcoin could finally occur and the price of Bitcoin will eventually be on its way back to its highs of $20,000.
There seems to be a divide between these two sides and such a divide has led to some historical moments in the cryptocurrency space such as the creation of Bitcoin Cash and the “battle of egos” that resulted in the creation of Bitcoin SV. Another key moment is the way the Bitcoin bubble seemed to keep on growing towards the end of 2017 and both sides of the track are seemingly behind this, to a certain extent.
If we fast forward to today, the price of Bitcoin is less than favourable and the valuation of the cryptocurrency probably won’t be jumping anywhere, anytime soon. That being said, it doesn’t seem to be going anywhere either and continues to fight on with the occasional wonky moment.
In 2017, there was a lot of hype for Bitcoin as it was gaining traction by mainstream media and newfound investors. Today, there isn’t a lot of hype, in fact, most of it has significantly died down. This leaves us wondering who is actually using the digital asset? Aside from the general community, who actually uses Bitcoin?
According to a blog by Chainalysis, data shows that most of the entities who hold Bitcoin are investors, meaning that entities who’ve purchased Bitcoin for the purpose of holding onto it for the long-term. It does seem that more than six billion Bitcoin was held in accounts that didn’t have any activity in more than a year.
Phillip Gradwell is an economist from Chainalysis who spoke to CoinDesk and said that when the aforementioned data was published that more of these investors are individuals instead of institutions. Compared to previous years, “there are [now] more people who are holding crypto personally… half of available bitcoin is still held by investors, but it has gotten somewhat less concentrated.”
More into the Chainalysis data, just under five billion Bitcoin was held in personal wallets at the end of August last year.
This figure showed a significant increase in the number of Bitcoin that is held by individuals rather than firms and long-term investors. At the end of 2017, Chainalysis found that around 4 billion Bitcoin was in the hands of individual investors. This sums up to around 26 percent of the overall circulating supply of BTC.
The economist explained that the increased diversity in BItcoin wealth distribution is primarily down to the fact that long-term have sold off large chunks of their assets to fresher faces in the industry. A lot of these sales happened towards the end of 2017 during Bitcoin’s big bubble fiasco.
Gradwell said that the higher amount of individual holders could mean that there are a greater number of entities that would be ready to use Bitcoin to make a purchase. This only works though if they are given the right opportunity to do so. “They are ready – if things were to change, [if] the opportunity to spend it were to arise – to actually spend it. We’ve kind of overcome the first hurdle of adoption, getting bitcoin into people’s hands.”
So getting Bitcoin in people’s hands is all well and good but without the means to spend it on their day to day items, what’s the point? So what needs to happen before investors will be able to spend their BTC.
The economist went on to explain that the development of solutions such as the Lightning Network could encourage holders to make purchases. The lack of user-friendly interfaces for Bitcoin purchases is also a big obstacle in the way for bitcoin as a way to make everyday purchases.
The founder of the APAC marketing agency Tower Brands, Chris Williamson said:
“Bitcoin had a cost and speed issue during the peak that will prevent it from becoming a practical payment network for consumer goods. For consumer mass adoption, a cryptocurrency would need to be widely accessible, accepted as a payment method by merchants; stable, and be superior in convenience to the current payment methods (cash or credit/debit card).”