By Stephen Pair, co-founder and CEO of BitPay
With the SEC’s recent approval of a basket of spot Bitcoin ETFs from some of the world’s largest asset managers and financial institutions, the crypto asset class has now become mainstream. More investors have access to Bitcoin and crypto than ever before. Prices of the top coins by market cap have also seen strong upward momentum over the last 12 months.
All of this has significant implications for the future of crypto as a medium of exchange. Crypto payments have historically become more commonplace during bull markets. While ETF investors will not hold Bitcoin in personal wallets, accessibility and awareness will dramatically increase. Coupled with a significant boost in investor confidence and institutional acceptance, this sets the stage for a wave in adoption of cryptocurrency purchases, the embrace of self-custody wallets, and eventual integration of crypto payments into everyday transactions.
Bitcoin ETFs: a positive signal for crypto adoption
Now that there is less regulatory uncertainty, it’s not unreasonable to anticipate that payments during this bull market cycle could exceed expectations. While crypto payments were once considered to be somewhat of a fringe, niche specialty that might attract a particular customer base, that base has now expanded.
In addition, investors can now gain exposure to Bitcoin through traditional brokerage accounts without having to worry about buying, trading, and securing their assets. Before January 10th, 2024, issues like tax complications, regulatory compliance, and navigating a foreign ecosystem posed substantial barriers to entry. While the ETFs make Bitcoin exposure more accessible, sophisticated and tech savvy investors can still choose to hold Bitcoin directly in their own self-custodial wallets.
Prices and payments: a positive correlation
Bitcoin reached a 2-year high of $49,000 leading up to the ETF approvals, followed by a drawdown of about 20% to sub-40,000 levels. The price has since recovered to over $42,500 as of January 31.
This newfound support for the asset class could easily accelerate the bull market that began in 2023. Bitcoin ETFs are buying up a large portion of the available supply. At the same time, the oncoming supply is set to be cut in half by April 2024. The current block reward for Bitcoin miners is 6.25 BTC. Following the upcoming Bitcoin halving, that will be reduced to 3.125.
A supply shock is set to coincide with a demand shock. Both should be supportive of prices, which in turn tends to be supportive of consumer payments made with crypto. As hodlers see the value of their assets increase, they become more incentivized to take profits by making purchases. This reaction often receives little fanfare in the news but is all too evident from the perspective of crypto payment processors and the merchants who integrate their services.
Merchants are positioned to prosper from the rise in adoption
While the focus as of late has been on Bitcoin as an investment, the positive sentiment surrounding recent events will also benefit crypto payments and merchants. In the past, there has been a strong correlation between bull markets in crypto and an increase in crypto-related activity like wallet creation, buying crypto, and, ultimately, payments.
In just the first whole week following Bitcoin ETF approvals, Bitcoin payments accepted by BitPay merchants rose over 60% from the previous week. Additionally, as the new investment opportunities settle in, BitPay is seeing a steady stream of new merchants integrating crypto payment processing technology.
Innovative merchants who allow customers to pay with cryptocurrency will benefit from increased adoption and spending. A narrow window still exists where those who integrate crypto payments now will be ready to receive an influx of new customers looking to spend their coins, often resulting in higher spending vs those paying with credit cards - notably in high-ticket item verticals like cars, boats, gold and precious metals, luxury goods, jewelry/watches, and travel. Integrating crypto payments into business operations often incurs no additional overhead costs and requires a very minimal investment of time and capital.
The ROI potential here is significant. By doing little more than adding an additional payment method at checkout, merchants can attract new customers and sales without the need for expenditures in their marketing budgets. Few other opportunities like this exist for businesses.
Coupling the overall consumer adoption spurred by Bitcoin ETF approvals and high opportunity/low barriers for merchants, 2024 is set to be a great year for crypto payments.
Stephen Pair is the co-founder and CEO of BitPay, the world's leading provider of blockchain payment technology.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
