Bitcoin was invented in 2008 and launched in 2009, but after years of skepticism it’s becoming a part of mainstream conversation. The value has continued to rise since 2017, but since the start of 2021, the price has surged and many more companies are looking for ways to get involved.
Tesla and Square have invested. You can even buy a Tesla with bitcoin. Goldman Sachs and JPMorgan are exploring ways to meet customer demand for cryptocurrency investment. An NFL player converted half of his salary into Bitcoin. Major League Baseball’s Oakland Athletics are offering a suite for the 2021 season at the price of one Bitcoin.
So, if it’s been around for so long, why are we only seeing this mainstream push now?
“I think the bitcoin ecosystem is developing to the point where people can start to think about using it as a currency,” said John Sedunov, PhD, associate professor of finance who studies Bitcoin. “However, the price still remains volatile and it isn’t clear that the currency can maintain its current $50,00-60,000 value.”
While there are companies adopting and investing now, this will still be a gradual process, Sedunov says.
“As businesses become better able to accept the currency, and perhaps more importantly better able to withstand and manage the volatility of bitcoin and other cryptocurrency, then the currency will become more widespread in its use. The process would be expedited if the entire supply chain accepted bitcoin, rather than just the retailer and the end of the chain. This would smooth the process and allow people to utilize the currency without as much concern for converting it.”
Additionally, Sedunov notes that there needs to be a continued evolution of the ability of firms to accept and manage the currency, in addition to a reduction in the volatility of the currency. Smaller businesses may be at much more of a risk than large corporations and banks if there is price instability.
But the value of Bitcoin won’t be this high forever. As the country and economy continue to deal with impacts of the pandemic, there are growing concerns that inflation could be next, pushing consumers to other options, like cryptocurrency.
When the pandemic ends and there is, perhaps, more economic stability, Bitcoin’s value will wane a bit, but I don’t think it will fade to nothing,” Sedunov notes. “The big question mark, to me, is the US Dollar and inflation. Inflation expectations are rising, and this only pushes people more toward alternatives. If this trend continues, then perhaps economic stability will be a bit lower, and more people will flock toward Bitcoin.”
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John Sedunov, PhD The Michele and Christopher Iannaccone ’91 Associate Professor of Finance | Villanova School of Business
John Sedunov, PhD, is an expert in banking, cryptocurrencies and financial institutions