Online Purchases Top Crypto Use as Adoption Reportedly Grows
In time for a Reuters analysis which puts Bitcoin as having outperformed stocks this year, new reports hint at what Bitcoin, as well as other major cryptocurrencies, are being used for. With one claiming they are used more for online purchases while the other cites their use for child porn has risen, the reports sought to grow correct knowledge of cryptocurrencies even as the awareness and their adoption is reportedly improving in the wake of the coronavirus outbreak.
Reuters notes that Bitcoin has so far in 2020 done better than both U.S. and world stocks by posting a loss of around 5% compared to respective drops of 13% and 16% for the S&P 500 and MSCI All-Country World Index. This view is partly supported in an academic paper that finds that, on average, each new Covid-19 case led to an inflow of money into the cryptocurrency market, causing the value of tokens to increase – though the relationship later shows a U-Inverse shape in which the effect reversed.
The analysis adds that despite the top cryptocurrency’s soaring up to 80% since mid-March, though, partly for offering a chance for quick returns in the wake of stimulus measures washing into markets, it fared worse than traditional safe havens like gold and U.S. 10-year Treasuries.
Yet, a 2020 survey from The Economist Intelligence Unit identifies digital currencies (such as Bitcoin, Ether, XRP etc) as providing a growing choice of options for use though they are still the last form of new digital ways to pay according to survey respondents. Only 5% of respondents “always” and 10% “often” use them as they still prefer physical credit or debit card, followed by online banking, cash before cryptocurrencies.
Top reasons for using a digital currency according to the respondents are “primarily for online purchases/payments” (34%) while “general interest in it as a technology” and “short term investment i.e. speculation” follow at 24% each. This is considering that the survey, sponsored by Singapore-based crypto.com, estimates that cryptocurrency awareness in developed economies has reached 79% (92% in developing ones, with an overall survey average of 85%) and developing economies show greater affinity: 41% claim ownership and 23% usage. In developed markets, only 19% claim ownership and 9% usage—all in, the average is 16%.
The Economist report concludes that favor seems to outweigh fear as the concept of going cashless is getting embraced broadly with a variety of technologies taking the place of cash. It maintains that support levels for digital currencies “appear higher in younger and developing-economy populations” – same populations that pushed mobile devices to become the dominant way the world goes online today – paving the way for wider adoption ahead. It adds:
“Digital currencies are currently undergoing a heightened period of public awareness (85% overall according to the survey) and innovation as governments from China to Sweden experiment and businesses from tech to finance try new offerings.”
However, for forensics firm Chainalysis, the past year has seen an uptake in the use of cryptocurrencies like Bitcoin and Ether to pay for child sexual abuse material (CSAM) with about $1 mln in these currencies flowing into child pornography-linked wallet addresses. Though these transactions represent a miniscule fraction of all cryptocurrency activity, the firm notes in a recent post that the tracked $930,000 worth of Bitcoin and Ethereum payments to addresses associated with CSAM providers in 2019 represents a 32% increase over 2018 which in turn is a 212% increase over 2017. They attribute most of these yearly increases to “rising adoption of cryptocurrency rather than increased demand for CSAM.”