The versatility and potential of Bitcoin has allowed it to be seen as a tool for different purposes. Among these are as an investment instrument, in order to obtain future profits, and as a currency, to make payments and transactions without the limitations of fiat money and traditional banking.
According to a report published by Block, Inc. (A company led by the former CEO of Twitter, Jack Dorsey) the income a person receives has a significant influence on his or her perspective on the usefulness of Bitcoin in his or her life. This conclusion is based on the responses of 9,500 respondents from 14 different countries, located in different regions of the world.
The report titled “Bitcoin: Knowledge and Perceptions” states that people with high or above-average incomes tend to view Bitcoin as an investment instrument. Most respondents stated that “a good reason to buy Bitcoin is to make money.”
Generally, low-income individuals consider Bitcoin as a method of sending money and paying for goods and services. This means they view Bitcoin more as a currency than an investment.
Satoshi Nakamoto, the pseudonym by which the creator of Bitcoin is known, presents his product as “a peer-to-peer electronic cash system” in his White Paper. In this sense, Bitcoin can be considered to be a currency. Despite its changing market value, many have profited from buying and selling BTC. As a result, it has also become an asset that can be speculated on for a profit.
Currencies and their use as safe haven or speculative assets
Venezuela is a good example of how a currency can shift from being primarily a payment instrument to a safe haven by providing the right conditions. This country experienced hyperinflation between 2012 and 2020, which was the trigger in this instance.
People were turning to the US dollar and bitcoin at that time as safe haven assets because of the bolivar’s dramatic and constant decline.
Although the above example adds a fiat currency to the equation, it allows us to analyze the reaction of a society that, in the midst of an economic crisis, can turn a currency into an asset to protect its wealth, regardless of whether it is issued by a central bank or a decentralized network such as Bitcoin.
While the USD may have been the refuge of choice for most Venezuelans, Bitcoin was not absent. CryptoNews reported at the time how the adoption of the currency designed by Satoshi Nakamoto accelerated its growth in this country as a result of the devaluation of the bolivar and the exchange controls imposed by the national government.
Interest in Bitcoin by country
When assessing the reasons for the greatest interest in Bitcoin by country, China, Nigeria, Vietnam and India were at the top of the list of those intending to acquire BTC to send remittances and make purchases. These nations share the same characteristic of having low GDP per capita of their population compared to high remittances income.
Back to the topic of the use of Bitcoin as a refuge from inflation, it is not surprising to see Argentina leading this list of countries. Inflation and exchange controls established by the government have sparked the use of Bitcoin among South American citizens.
The level of optimism regarding the future of Bitcoin is another aspect in which countries such as Argentina, Nigeria, Vietnam and India lead the way. Also, the population in these countries admits to having a greater knowledge about the use and operation of Bitcoin, according to the results of surveys conducted by Block, Inc. in conjunction with Wakefield Research.
A curious fact about the optimism about Bitcoin’s future is that people with higher incomes, who see it more as a speculative or investment instrument, have more faith in it. On the contrary, people with lower incomes, who mostly see Bitcoin as digital money, are not so optimistic about its future.
Bitcoin will have to be reborn
The driver that has given the most impetus to Bitcoin’s recognition globally may be its performance at the speculative level and not its digital cash function. Changing this perception on the part of most people who see it that way may take years of education on the matter.
According to college-level finance writer and professor Noah Smith, “the faster Bitcoin as an investment dies, the faster it will come to life as a currency.” This statement is part of a report by Smith for Bloomberg in 2015 and was reviewed at the time by CryptoNews.
Smith believes that people must abandon the expectation that the price of BTC will skyrocket at any moment in order to capitalize on profits. When that changes in the mindset of those who hold bitcoins, its use as a currency will become more widespread, as there will be a greater willingness to part with it when using it to pay for goods and services on a daily basis.