The Growing Retail Interest in Crypto

First-generation cryptocurrencies like Bitcoin and Litecoin were designed to help provide an alternative payment system and store of value to the billions of individuals and businesses that have been failed by traditional currencies — most of which are plagued by rampant inflation, counterfeiting, and the fact that they’re based on debt.

Indeed, cryptocurrencies and the surrounding decentralized finance (DeFi) technologies are widely thought to be a promising alternative to banks and traditional financial institutions — since they can be used to essentially bank the unbanked and provide a decentralized monetary system that is free from manipulation and centralized control.

Obstacles to Retail Adoption

Retail investors — i.e. non-professional investors putting their own money to use — are set to benefit most from cryptocurrencies — given their previous and projected meteoric growth, and potential to disrupt the traditional economy in both foreseeable and unforeseeable ways.

Nonetheless, despite their promise, there are a number of obstacles that will need to be overcome before cryptocurrencies and related technologies are recognized and used by the masses. Most of these can be narrowed down to the technical challenges that come with acquiring and using these cryptocurrencies, as well as the public perception of their purposes and utility.

According to recent estimates (1,2), there are now somewhere in the order of 100 million to 300 million cryptocurrency holders worldwide, around half of which are located in India, the USA, Russia, and Nigeria. Likewise, the demographics show that the vast majority of holders are either Millennials or from Generation Z, adoption among older generations — including Generation X and the Baby Boomers — is far lower in most countries.

Though these numbers are impressive when you consider that cryptocurrencies have only been around for just over a decade, it still falls far short of the mass adoption required to make them a true alternative to fiat.

Unfortunately, the tech-heavy nature of using cryptocurrencies and interacting with the burgeoning DeFi landscape has slowed their adoption among governments, institutions, and businesses — which are notoriously slow on the uptake of new technologies. This has largely restricted the utility of cryptocurrencies to crypto-native projects which are able to support native crypto deposits and payments.

But with cryptocurrencies offering dramatic advantages over fiat, including true financial self-sovereignty, near-instant cross-border transactions, freedom from manipulation and counterfeiting, and access to a huge range of permissionless protocols and platforms, adoption is beginning to pick up.

Why is Retail Interest Increasing?

In the last year, retail interest in cryptocurrencies has skyrocketed amid an explosion of innovation in the space and adoption among institutions.

According to recent data by blockchain analytics firm Chainalysis, crypto adoption spiked by a staggering 881% in the last year alone. This spike occurred alongside rising transaction volume on centralized services, as well as meteoric growth of the DeFi sector — boosting utility for most cryptocurrencies while providing users with more ways to easily enter the market.

Throughout the last year, a number of clear events have helped to catalyze a major surge in cryptocurrency adoption. Arguably the most prominent of these is Paypal’s entry into the crypto space. This saw the digital payments giant roll out cryptocurrency buying and selling functionality, as well as a cryptocurrency wallet service in the US back in April 2021, before expanding its offering to the UK in August.

Likewise, a dramatic boost in institutional adoption, including by the likes of Visa, Tesla, Square, and a variety of other multinational corporations, has provided a major signal of faith to consumers, providing the confidence needed to catalyze adoption among those previously on the fence.

This is made apparent by the stark increase in the number of small value holders across major chains including Bitcoin and Ethereum. According to a recent report by Bitcoin Exchange Guide, the number of small ether holders (defined as those holding between 0.01 and 1 ETH) increased by 58% since the start of the year, while the number of small BTC holders (defined as those holding between 0.001 BTC and 0.1 BTC) increased by 15% YTD.

This is congruent with a dramatic uptick in exchange registrations and wallet counts, while many mixed-asset exchanges, including Robinhood, have seen their cryptocurrency services become their main source of revenue. With cryptocurrency exchanges becoming increasingly well-known and many of these rapidly expanding the range of services they provide, the perks of using cryptocurrencies are coming into focus for many users.

Combine this with the rapid proliferation of cryptocurrency-powered VISA debit cards, and it becomes clear that more people than ever before are not only investing in cryptocurrencies but also using them throughout their daily lives.

The Path to Mass Adoption

In order for cryptocurrencies to truly reach the levels of adoption and utility seen by regular fiat currencies, they need to be just as (if not more) accessible.

We are now beginning to see the advent of the first wave of so-called crypto banks, which offer traditional banking services with integrated crypto wallet functionality, to help provide an intuitive on-ramp for less tech-savvy users. Moreover, with the development of human-readable addresses for many cryptocurrencies, like the Ethereum Name Service (ENS), Tezos Domains, Unstoppable Domains, and more, receiving and sending cryptocurrencies might become far more intuitive.

But without a clear legal framework to operate in, many businesses are still hesitant to offer crypto services to their customers.

Fortunately, most countries are now developing their own cryptocurrency regulatory frameworks which may not appease all, but will give businesses and enterprises the guidance they need to operate legally, and potentially begin accepting crypto native payments. Until most countries have this framework in place, major institutions are unlikely to offer crypto services or accept native crypto payments due to a lack of clarity on which (if any) licenses are needed to operate legally.

With progress being made rapidly, and Bitcoin already considered legal tender in one country (El Salvador) and more potentially on the way, cryptocurrencies are quickly coming into the light as a viable successor to fiat. With this, mass adoption is almost certain, if not imminent.

About Master Ventures

Master Ventures is a blockchain-focused venture studio helping to build the next generation of blockchain-based Web 3.0 system innovations within the crypto industry. Launched in 2018 by Founder and CEO Kyle Chassé, the company’s ethos can best be summarized in the acronym #BeBOLD: Benevolent, Open, Love, Decentralized.

Master Ventures co-creates with entrepreneurs and businesses worldwide to turn the best ideas into innovative and disruptive products. They do this by investing as strategic partners through offering advisory services to the projects they believe in. To date, Master Ventures has invested in over 40 crypto projects, including the likes of Kraken, Coinbase, Bitfinex, Reef, DAO Maker, Mantra DAO, Thorchain, and Elrond.

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