With the astronomical rise in the popularity of cryptocurrencies this year, does this new crypto technology have what's needed to replace banks?
Tweet courtesy of Ripple — bringing crypto to central banks.
Central bank digital currencies would need to provide most of the same benefits of crypto to stem the competition coming from DeFi systems. Central banks may need to let commercial banks fend for themselves as users could transfer funds to be held in CBDC accounts — this would allow for lower fees with fewer middlemen between transactions.
“These factors will increase the competitive pressures on commercial banks. They face the risk of disintermediation,” Barron’s reported via Morgan Stanley.
Commercial banks and financial services will need to adapt to provide more value to their users. The fact is that as the public becomes more educated on crypto and decentralization, the more they see the benefits in the future of finance and the internet.
The public is beginning to realize that cryptocurrency goes far beyond Bitcoin, and there are much deeper uses for blockchain and DeFi. The will of the people will always prevail, and what people always want is more convenience and better solutions to their problems. The new buy-in from individuals and institutional investors is leading to a financial tipping point: one that could lead to an eventual replacement to banking and finance as we know it.
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Are Avid Investors Going to Migrate to Crypto and DeFi?
Many avid investors have begun flocking to crypto and DeFi due to unbelievable returns, sometimes reaching the thousands in terms of ROI percent. But more than that, there is a class of long-term investors that see the immutable value of currencies like Ethereum beyond a store of value or trading coin.
The more media attention crypto seems to get, the more investors are attracted. More investors are becoming interested in crypto because there are so many more resources available to find out more about blockchain technology implications.
The youngest age demographic is most likely to participate in crypto, with 58% of digital currency owners worldwide being under 34, according to a 2021 survey.
A whopping 27% of people ages 18-34 prefer Bitcoin (the largest crypto by market cap) over stocks (April 2019 study). The youngest age demographic of investors is the most likely to adopt Bitcoin and other cryptocurrencies as a large or maybe the largest portion of their portfolios.
Additionally, 54.9% of retail investors are between the ages of 26 and 40. This class of investors has shown increasing interest in crypto in 2021 after it provided unprecedented short-term opportunities.
From Dogecoin to Ethereum, speculation and value investing have been off the charts in a crypto bull run. This young investor demographic has grown impatient and used to sky-high returns and volatility.
This age category is the next most likely to enter the crypto scene. 36% of crypto investors worldwide have an income of over 100,000 USD. The next wave of crypto buyers is older, with an average age of 44 in the USA.
Even ages 45-54 show signs of adopting crypto as the average age of the crypto-curious settles around 44. Many in this age group are looking for extra portfolio allocations that may help them reach a comfier retirement. However, many Gen Xers prefer a relationship with mutual funds and safe stocks like Apple or Amazon.
The Baby Boomer generation shows a less than 1% likelihood of investing in Bitcoin as a long-term investment (July 2018 study). They have little trust for digital currency and prefer mainstream investments as safer vehicles for their wealth as they look to transition out of the workforce.
Those ages 65 and over aren’t likely to contribute to cryptocurrency’s rise, as they are mostly concerned with safe investments to hold them through retirement. This age demographic is not as familiar with tech and has very low trust for digital assets. They are more likely to stay the path of 90-year-old investor Warren Buffet with a background in safer blue-chip stocks and mutual funds.
We shouldn’t forget that Asia and China make up a huge portion of these demographics, with over 59 million crypto users.
Cryptocurrency ownership and participation are clearly most popular with the younger generations. However, across demographics, a study by Gemini concluded that education is critical in converting those who are curious about crypto into investors. The more people learn the benefits of crypto and decentralization, the more likely they are to realize the expansive benefits.
What First Steps Should You Take If You Want To Join The Cryptocurrency Revolution?
Have you been thinking about getting involved in crypto? Decentralization gives power back to internet users, and there are several ways you can get involved. Consider the following:
1. Get Started With an Exchange and Crypto Wallet
2. Staking, Mining and More
3. Fight Against Crypto Bans and Over-Regulation
There is a way that government and crypto can coexist so long as they tax it accordingly while still allowing unrestricted innovation and use. Keep informed about your government’s approach to crypto and blockchain and speak out, organize and react against bans and overregulation as a new member of the crypto revolution.
What’s Next for Crypto and DeFi
It remains to be seen what the intersection of centralized digital currency and DeFi will look like. But DeFi will most likely replace large swaths of traditional finance with easier and borderless mobile payment methods like Stellar. Governments and banks will have no choice but to innovate or risk being replaced.