14 years after the first commercial transaction with bitcoin, the cryptocurrency faces recent phenomena, such as the last halving and long-standing problems ranging from high taxes to volatility that alienates many users.
In mid-2010, when smartphones were new and Facebook was the dominant social network, a key milestone occurred in the history of digitalization. That May 22, Laszlo Hanyecz, an American software developer , bought two pizzas with 10,000 bitcoins at a Papa John's in Florida. It was the first commercial transaction carried out with the help of this young cryptocurrency.
Today, 14 years later, a lot of water has flowed under the bridge, especially due to the price that bitcoin has gained since then. As an example, if in 2010, Hanyecz could simply use 10,000 bitcoins to have lunch with friends, by 2024, he would buy mansions and private jets without any problem. It turns out that the aforementioned amount was equivalent to US$ 41 in 2010, but now amounts to US$ 700 million. In fact, to be exact, this May 22, the cryptocurrency reached peaks greater than US$70,000 per unit.
WHY IS BITCOIN STILL NOT TRUSTED?
Just like its price, the scope of bitcoin has grown like wildfire. “To date, there are more than 15,000 businesses that accept payment with this cryptocurrency worldwide. Some of them have cashback proposals or benefits that make bitcoin a more attractive asset. Walmart is a clear example,” declared Agostina Colaizzo, cryptocurrency expert and Banking & Investments Manager of Mercado Pago for AméricaEconomía .
Colaizzo is referring to Walmart gift cards, which allow discounts on the retail chain's products if paid in bitcoin and other alternative currencies. In a similar vein, since January, Visa allows its users to withdraw cryptocurrencies such as bitcoin directly in 145 countries. “Obviously, we are not talking about a common means of payment for people. Currently, it is closer to a financial investment instrument,” warns the Mercado Pago executive.
In this way, bitcoin has evolved differently from how its creators envisioned it. Initially, it was conceived to purchase goods as trivial as a pizza, but today most users rely on it as a solid store of value. Although beyond mistrust, there are other reasons that explain why bitcoin is not a widespread means of payment.
“First, it has tax treatment as an asset, which means that every time you pay for a coffee with bitcoin, the treasury considers it as a “sale” of the asset. This means that in many places, paying with bitcoin represents a taxable event at the end of the year. Even if it is something simple like a coffee,” Mauricio Di Bartolomeo, co-founder of Ledn, a startup that offers credits backed by Bitcoin , told AméricaEconomía .
According to Di Bartolomeo, this is the main cause that motivates many people to obtain loans in dollars supported by cryptocurrency, because these are not taxable events. Thus, requesting these credits allows you to use dollars or stablecoins for everyday expenses without selling the bitcoins. “But also, transaction costs in bitcoin are high, and transactions are confirmed every 10 minutes. Finally, the volatility of cryptocurrency makes it difficult to generate payment receipts for more than a couple of hours. This adds friction to the payment experience.”
The Ledn manager maintains that these restrictions prevent initiatives, such as the Lightning network, from being more successful. For example, this service allows instant and almost free payments with Bitcoin, but does not eliminate the obligation to pay taxes. This contrasts with the fact that in Central American countries such as El Salvador, Costa Rica and Guatemala, communities are being created with circular economies that use Bitcoin on the Lightning network.
For his part, Nicolás Jaramillo , director of operations at Arch.Finance, identified 2022 as a key year for bitcoin as a means of payment. On the one hand, Salvadoran President Nayib Bukele declared it legal tender in his country, while corporate giants such as Tesla, Amazon and Stripe began to receive cryptocurrencies as means of payment.
“I think bitcoin will continue to grow, especially in two use cases: international trade, since the advantage of cross-border payments is much greater with this technology. And high-value payments, since crypto is much more convenient and faster for buying real estate or cars, for example,” explained Jaramillo for AméricaEconomía .
The Arch.Finance expert also does not believe that the average user will adapt to bitcoin in the short term. He defines it as a “change of rails” or mentality, as it involves replacing classic methods such as bank accounts or credit cards with crypto wallets. “Today we see Bitcoin as a frequent asset in the crypto ecosystem, but that is still a smaller percentage in global terms: around 5% to 10%.”
On the other hand, Tomás Villanueva, CEO of Skipo, a digital wallet that allows you to buy, sell and transfer cryptocurrencies, is optimistic about the future of bitcoin, although with reservations. “It is likely that in the future several of the accessibility problems will improve, but for now the ones that have been adopted the most are payment solutions that have facilitated purchases with bitcoin and other cryptocurrencies in commerce. Examples of these are digital wallets, which allow people to pay in stores, while the business receives the currency of their convenience without having to deal with direct interaction with the bitcoin network,” Villanueva explained.
THE AFTERMATH OF THE HALVING
A month has already passed since the last halving , the event that every four years reduces by half the amount of new Bitcoins that can be generated or “mined” daily. Given this reduction in currencies, there is an increase in its valuation. It should be noted that the halving effect usually manifests itself within 12 months after the event.
“So far, I think it's been just as we expected. The market anticipated the halving, taking us from US$20,000 to a new high above US$70,000. Now we are preparing for the next upward move,” revealed Mauricio Di Bartolomeo.
Like Ledn's representative, Villanueva maintains that since the effects of the halving are not immediate, the value of Bitcoin has shown a positive trend, "although with the expected volatility." Likewise, for Nicolás Jaramillo, the effect of said event on the decrease in the money supply accumulates over time. In the long run, this can generate a massive rise in Bitcoin, reaching a new all-time high within 12 to 18 months after the halving .
Another notable trend in recent weeks has been the reduction in bitcoin fund flows going into ETFs. “Earlier in the year, there was a significant increase in these flows as many institutions sought to gain exposure to bitcoin through these funds for the first time. This initial interest was due in part to the perception that ETFs offered a more accessible and regulated way to invest in bitcoin, which attracted a new wave of investors,” says Villanueva.
But in the post-halving stage , the market approaches normality in terms of the launch of new ETFs, which reduces the arrival of new flows. Additionally, Skipo's CEO maintains that as the price of bitcoin rose, some investors may have chosen to take profits. This could have resulted in periods of net outflows from ETFs, especially among those investors who entered in the early stages of the price rise.
Likewise, the postponement of the reduction in interest rates by the US Federal Reserve (Fed), which at the beginning of the year seemed possible, may have affected investors' willingness to maintain exposure to risk assets such as Bitcoin. , according to Villanueva.
Finally, in the long term, two key events in the United States may affect the cryptocurrency's drift: a future reduction in interest rates and the outcome of the November presidential election. Regarding the first possibility, Jaramillo is in favor. “We have to be attentive to the evolution of both inflation and the labor market in the US, because if we see weaknesses, the Fed will begin to lower its interest rates and it will be positive for our market.”
On the other hand, Di Bartolomeo believes that the US political establishment will maintain an open policy towards cryptocurrencies, regardless of whether Biden or Trump win the elections. “Democrats seem to have accepted that it makes no political sense to demonize industry and innovation. Now, being an issue supported by both parties, I think we will see a wave of positive changes for the industry globally,” he predicts.
