Bitcoin’s real adoption level is much lower than many people think – and that means its potential upside is much higher.Read MoreFeedzy
On March 9, U.S. President Joe Biden issued an executive order on digital assets. Commenting on the order, a senior member of the administration stated that some 40 million Americans – 16% of the total U.S. population – have reportedly invested in or are trading crypto.
This official’s statement echoed the results of a report released by Grayscale Research in December 2021, which stated that 26% of Americans own bitcoin (BTC). (Editor’s note: Grayscale is owned by Digital Currency Group, the parent company of CoinDesk). According to another 2021 survey from bitcoin investment firm NYDIG, 46 million Americans, or nearly a fifth of American adults, own bitcoin.
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In conversations with other professionals in crypto, I’ve heard people use statistics like these to assert that “adoption” of bitcoin in the United States is now above 15%. But in my view, this misses the mark – perhaps by an order of magnitude.
That’s because buying, say, $10 worth of bitcoin is not truly adoption, in my opinion. With bitcoin, adoption means recognizing bitcoin’s role as the world’s best hard-money asset – a monetary asset with a strictly limited supply. It means recognizing bitcoin as the best risk-adjusted and most liquid investment opportunity today. It means realizing that bitcoin is on a path to potentially becoming the world’s most valuable system for value storage and transfer.
Based on such realizations, “adoption” doesn’t mean buying a little bit. It means putting a significant portion of one’s net worth into bitcoin. This definition of adoption isn’t the 16% or more of the population cited by the Biden administration to own at least some crypto, including bitcoin. Instead, it’s the portion of the population that has put 20% or more of its net worth into bitcoin.
Measuring adoption by this standard is difficult. The portion of the U.S. population that has adopted bitcoin accordingly would be smaller – perhaps just 2%. But if bitcoin ultimately reaches its potential as the world’s best hard money asset, then its adoption by this standard could end up exceeding 50% in the long run.
Furthermore, because bitcoin is a monetary asset, its degree of adoption can grow over time along a spectrum for each individual who adopts it. A novice can begin by buying $10 worth and leave it on an exchange, and with time she can shift a greater portion of her savings into bitcoin as she learns about it.
In this respect, it’s different from the process of adoption for most technologies, in which adoption is nearly binary, like the question of owning a car (or maybe two) as opposed to no car, or owning a mobile computing device (or two) as opposed to none. In contrast, bitcoin adoption at the individual level is a sliding scale between dabbling and committing a significant portion of one’s net worth.
This has important implications for financial advisors. While you may think that putting 20% of your net worth into bitcoin sounds outlandish, I can tell you it’s already happening. In the last year, I’ve been contacted by numerous financial advisors who are building their businesses around bitcoin. Their clients aren’t allocating 1% of their portfolios to bitcoin – they’re allocating 10% to 30%. For these advisors, the cornerstone of their practice isn’t stocks, bonds, or real estate; it’s bitcoin.
This means that for some financial advisors, bitcoin is already graduating past being the next Amazon (AMZN). It’s now on its way to becoming something more like the next gold or even the next S&P 500 – and possibly the largest asset class in a client’s portfolio. Yet, the fraction of current and potential financial advisory clients who treat it this way is still small enough that it could grow dramatically in size this decade.
As the percentage of the American and global population that has truly adopted bitcoin grows, I expect financial advisors who are on the right side of this trend to reap rich rewards. It isn’t necessary to build a practice around bitcoin – yet – but financial advisors would be wise to find ways to ride the bitcoin adoption wave. It’s just getting started.
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