Mainstream investors give bitcoin payments a jolt

Bitcoin's price climbed from $29,000 to just below $42,000 in the first half of January before leveling off in recent weeks. Now, following a $1.5 billion investment by Tesla, many are asking themselves: Is there a ceiling?

If this pattern of rise and correction continues, I think it’s possible we will see a valuation of $100,000 by mid-2021, and more than $400,000 by 2025. However, this is contingent on several factors:

Crypto experts often talk about how bitcoin is immune from inflation. It has a fixed 21 million coins that will never go up or down. On the other hand, as banks continue to inject money into the economy, via relief packages and stimulus checks, amidst the COVID-19 pandemic and record high unemployment, some worry we’ll see increasing devaluation of government-backed currency. It’s economics 101. As many bitcoin enthusiasts use the cryptocurrency to hedge their bets against inflation, I expect this will drive the price valuation up.

As of today, just over 2,300 U.S. businesses accept bitcoin as a form of payment. Of this group, only a handful of major national companies accept bitcoin payments. There is a lot of room for growth here as cryptocurrencies go mainstream and a few major brands recently started accepting bitcoin, like Overstock.com, Microsoft and now Tesla. I expect we’ll see increased adoption and acceptance of bitcoin by large corporations over the next five years as more retailers and e-commerce merchants jump on the bandwagon. Not only can accepting bitcoin and other cryptocurrencies increase their customer base, but also it eliminates costly payment processing fees.

FinCEN, part of the U.S. Treasury Department, recently proposed new rules for cryptocurrency wallets, which could require money service businesses to report certain crypto transactions. Under the new rules, any transaction of more than $10,000 in a 24-hour period must be reported to FinCEN. The move would essentially classify bitcoin and other cryptocurrencies as "monetary instruments,” which are subject to the requirements of the Bank Secrecy Act, a law designed to prevent money laundering and other illicit financial transactions. If the rules are adopted, this could limit bitcoin’s reach. However, critics– including Square, the U.S. Chamber of Commerce and Coinbase – are pushing back, citing how it would slow adoption of cryptocurrency and invade consumer privacy.

The future is bright for bitcoin and there’s still room to expand. But it is also important to remember that bitcoin is not regulated, highly volatile and still is a gamble.