How Demographic Trends Are Setting Bitcoin Up For Success
Nick Chong is a writer and analyst who has been following Bitcoin since 2013. When he is not writing, he works on HTC's Bitcoin phone, EXODUS.
One of the biggest undercurrents to Bitcoin's success today is demographics. The study of human beings may seem to have nothing to do with magical internet money, yet data begs to differ. Millennials and then the "Zoomers" of Gen Z will drive the adoption of Bitcoin like never before, with a backdrop of a great wealth transfer driving record levels of investment in the asset.
Millennials Are the Perfect Generation to Adopt Bitcoin
By most definitions, millennials are the generation currently aged 24 to 39 — or, more accurately, those that were born between 1981 and 1996. Those on the younger end of the spectrum are just entering the workforce, while those on the older end have begun receiving higher-paying jobs and are moving up the corporate ladder.
The rise of millennials in the corporate world is setting the stage for Bitcoin adoption like nothing ever has before.
The Great Recession gave birth to two major developments: 1) Bitcoin and 2) the distrust of institutions by millennials.
The latter trend has culminated in millennials trusting technology over traditional banking services. 45.3% of the respondents of the generation to a World Economic Forum survey said they "disagree" with the sentiment that "banks are 'fair and honest.'" And Robinhood, the darling of the fintech world, reported in 2015 that 80% of its customer base are millennials.
As millennials' distrust in banks and simultaneously adoption of financial technologies has grown, this generation has begun to save. Business Insider reports that millennials are saving money earlier than their parents, the baby boomers, did, even though they have less wealth.
With more millennials saving and getting increasingly higher-paying jobs as they move up corporate ladders, they will naturally seek to invest their money and divest assets they have much of.
With more and more financial technology companies working on support for cryptocurrencies, Bitcoin has become a logical and accessible means for millennials to store their wealth.
We've seen this already with Robinhood and Square's Cash App — both of which have reported significant growth in their respective cryptocurrency operations. Now, PayPal, Visa, Mastercard, and more companies are entering the mix.
On top of these trends, we have celebrities and mainstream media outlets covering the industry. There is no better example of this than Dave Portnoy, the founder of millennial-focused sports and gambling site Barstool Sports.
In an August 4 livestream, Portnoy called on the Winklevoss twins to teach him how he can acquire and trade Bitcoin. His entrance into this space could spark widespread adoption amongst his largely millennial and Gen Z fanbase, which numbers in the millions. His video announcing his intent to buy Bitcoin alone garnered 500,000 views.
After pivoting to stock trading in March to challenge Warren Buffett, Portnoy has led an army of tens of thousands of traders. Bloomberg reported that Portnoy's antics were a driving force in increasing the 30-day volume of an airline ETF from $50 million to $200 million.
Adoption Is Coming
The confluence of these trends is fomenting true interest in Bitcoin. An oft-cited survey by Blockchain Capital published in April 2019 found that 48% of respondents (U.S. adults) aged 18 to 34 believe it is “strongly” or “somewhat” likely "most people will be using Bitcoin in the next 10 years." 42% of that same group intend on purchasing Bitcoin in the next five years.
A more recent analysis by JPMorgan found that millennials are flocking to Bitcoin amid the pandemic. "Simultaneous flow support has caused a change in the correlation pattern between bitcoin and other asset classes, with a more positive correlation between bitcoin and gold but also between bitcoin and the dollar as US millennials see bitcoin as an 'alternative' to the dollar," the note read.
That's not to say that those of older age cannot understand the ethos and appeal of Bitcoin in the ongoing macroeconomic environment. My grandfather called me in April and said he wanted to buy Bitcoin to hedge against the "destroying of currencies and the halving event." Those were his exact words, I swear.
That's also not to say that millennials cannot be skeptical of Bitcoin. To use another personal example, I remember a 30-year-old cousin of mine jokingly asking why Bitcoin isn't going to $0.
The point is: by and large, millennials may be the first generation to adopt Bitcoin on a large scale. They distrust institutions, appreciate financial technologies, grew up with video games and digital assets/money, and are becoming increasingly acclimated to saving their growing earnings.
Bitcoin almost seems like an inevitable next step for most millennials.
The Great Wealth Transfer
Underpinning demographics is a great wealth transfer from baby boomers to their children. Those children fall into one of three demographic buckets: Gen X, millennial, and Gen Z.
Baby boomers are the wealthiest generation in the history of the world. Benefiting from the post-war boom, the abolishment of the gold standard, the money printing of the 2000s and 2010s, and technology, baby boomers own approximately 57% of all wealth in the United States.
As this generation grows older and begins to pass, a transfer of wealth will begin, driving record levels of wealth into the pockets of millennials and the other two aforementioned generations.
According to Cerulli Associates, as much as $68 trillion worth of assets — from real estate and money market funds to stocks and private equity — will move between generations in the next two decades. Baby boomers alone are expected to allocate over $30 trillion to $40 trillion to their millennial children when they pass.
It's highly unlikely that 20%, let alone all of this capital will flow into Bitcoin due to how much of this wealth is concentrated in real estate. But as Messari's Ryan Selkis pointed out, if even one percent of this baby boomer wealth moves into Bitcoin, the price of BTC will go exponentially higher than it is now:
"There's a $30 trillion "great wealth transfer" expected in the next 20+ years. If 1% of that goes into cryptocurrencies, crypto will be a multi-trillion dollar asset class. That's the conservative case for $50k+ bitcoin."
With prominent Wall Street veterans like Paul Tudor Jones, Raoul Pal, Mike Novogratz, and more allocating 1% or more of their wealth to Bitcoin, what's the chance that millennials won't do the same?
As Raoul Pal said to Stephan Livera in a 2019 podcast:
What the hell does a millennial do to save for your future, when almost all assets have negative imputed returns for the next 20 years, 10 years? And the answer is well, you take the optionality of [...] Bitcoin.