Over the past several years a lot of people have invested in cryptocurrencies, but few have used it to buy things.
That's about to change - and in a very big way.
Most merchants are gearing up to accept cryptocurrency as payment within the next 18 to 24 months. As these capabilities roll out - and people start to take advantage of them - it will trigger an unprecedented surge in demand for crypto.
It's simple: To buy things with crypto, you need to obtain crypto. Some people will use crypto they already own, but it stands to reason if crypto is being spent, it's also being bought.
And some people will use crypto they've earned. According to a study by SoFi at Work, more than one-third of workers (36%) want the ability to receive at least part of their pay in cryptocurrency.
Already top sports stars like Russell Okung, Odell Beckham Jr., and Aaron Rodgers are getting paid, at least in part, in cryptocurrency.
As merchants ramp up their efforts to make crypto spendable, all of this will create a virtuous cycle. More spending, more demand, higher crypto prices. And higher crypto prices will encourage more adoption and more employees wanting to be paid in crypto - leading to more spending.
This may be the biggest crypto catalyst yet.
I'll show you why and share my prediction, too...
Crypto Will Plug into the Biggest Part of the Economy
Think about it. Consumer spending makes up about 70% of the U.S. economy. That's more than $16 trillion worth of transactions per year.
Claiming even a small slice of a pie that big will have a tremendous impact on the demand for cryptocurrencies. Just 5% would be $800 billion worth of transactions. Consider that the total value of all cryptocurrencies is just over $1 trillion.
But, you may say, crypto has been around for more than a decade. Why hasn't this happened already?
Actually, people have used crypto to buy things. Lazlo Hanyecz famously bought two pizzas with 10,000 BTC very early on, on May 22, 2010 - a date commemorated as "Pizza Day" by some crypto enthusiasts.
But using Bitcoin (BTC) and other cryptos for payment didn't catch on. Reasons included crypto's notorious volatility, the public's unfamiliarity with it, the scarcity of vendors willing to accept it, and the fact that under current U.S. tax law every crypto transaction is a taxable event, no matter how small.
Much of that has changed over the past couple of years, or will soon. Certainly most people have heard of crypto even if they haven't bought any themselves. The volatility hasn't gone away, but should moderate with time as more people use crypto. And people have come to realize that despite the price swings, top cryptos like Bitcoin gain value over the long term.
The tax issue could get fixed by the Lummis-Gillibrand crypto bill, which could become law next year. It proposes a de minimis exclusion for transactions below $200.
But the biggest shift has been in the mindset of merchants. They're convinced customers are now starting to warm to the idea of paying with crypto - and they're getting ready.
Putting the "Currency" Back in Cryptocurrency
"All retailers are looking into it," Leon Buck, the National Retail Federation's vice president of banking and financial services, said of crypto payments in a May NRF article. "This is coming, and we are aware of it, and I think retailers have seen the future, and we are ready to adjust."
In a December survey by Deloitte of 2,000 senior executives at retail companies, 85% said they "anticipate that digital currency payments will be ubiquitous in our industry in five years."
As for enabling the use of crypto payments in their own companies, 85% of the executives said it is a high or very high priority. The Deloitte report said "nearly three-quarters of those surveyed reported plans to accept either cryptocurrency or stablecoin payments within the next 24 months."
Merchants have several strong incentives to move as quickly as possible on this.
For one thing, no one wants to be the laggard in adopting a new technology. But the survey suggests an even more powerful motive - 93% of those who already accept crypto payments said it has had a positive impact, boosting customer growth and brand perception.
A survey of merchants by data platform PYMNTS published in June echoed the Deloitte findings. Among firms with more than $1 billion in annual sales, 85% said they planned to add crypto payments as a way to attract new customers. Elimination of payments middlemen was cited by 82% as another reason to accept crypto.
Along those lines, 77% were attracted to crypto as a way of reducing fees. Many customers don't realize that merchants pay an "interchange fee" of between 1.5% and 3.25% on every credit card transaction. According to the PYMNTS report, crypto transaction fees for merchants are about 1%.
Appealing to the younger demographic is another motive - it's what inspired fashion retailer Pacsun to start accepting crypto payments last October.
"The Gen Z audience, our primary consumer, is very tech-oriented, and we dedicate a lot of our efforts towards social media and ecommerce to align with their lifestyles and resonate with them on a more personal level," Michael Relich, co-CEO at Pacsun, said in a company statement. "Seeing their increasing desire towards cryptocurrency, it was clear that we needed to adjust and offer BitPay as another payment option, to further instill their confidence in us as one of their go-to retailers that truly listens."
The groundwork is already being laid.
Crypto Will Become Part of the Consumer Experience
You may not realize that many businesses you currently use accept crypto.
More than 250 companies use payment processor BitPay as a sort of "middleman" that allows them to accept crypto payments.
Merchants that accept crypto payments via BitPay include AMC Theatres, Microsoft, SlingTV, Menufy, and, as mentioned above, Pacsun. Many more allow you to buy gift cards with crypto.
Using a payment processor like BitPay, Coinbase, or CoinGate will be a primary way merchants offer crypto as a payment option.
Not to be left out, though, are the credit card companies. Both Visa and Mastercard have already dipped toes in the crypto waters.
Mastercard offers a card through crypto lender Nexo that's backed with crypto the cardholder keeps in their Nexo account. Visa offers a crypto rewards debit card through exchange Crypto.com and a rewards credit card through lender BlockFi.
Both firms, worried about losing business to crypto companies charging lower fees, are looking hard at more ways to incorporate crypto into what they do.
"We will continue to lean into the crypto space and our strategy is to be a key partner to provide the connectivity, scale, consumer value proposition, reliability and security that is needed for crypto offerings to continue to grow," Visa CEO Al Kelly said on the company's January earnings call.
All signs point to crypto becoming fully integrated into consumer payments over the next few years.
And this broad-based trend has the firepower required to push crypto prices to levels that not long ago seemed unthinkable - Bitcoin as high as $250,000 and Ethereum at $14,000 - within the next five years or so.
In fact, there's a Wall Street insider - famous for being a conservative investor - who's even more bullish on Bitcoin than I am. For a long time, he was a huge crypto skeptic, but now he's saying it's the best investment opportunity to come along in the past 30 years.
Skybridge Capital's Anthony Scaramucci has a bold Bitcoin price prediction that's been making headlines, and you can see it right here, along with his advice on what every American should do right now...
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.