Understanding Bitcoin and Cryptocurrencies: Knowledge and Adoption

Have you ever wondered how many people truly understand what Bitcoin and cryptocurrencies are?

Bitcoin Awareness in the Digital Age

Bitcoin, the pioneering decentralized cryptocurrency, has become a household name since 2017. According to news reports and coverage, nearly everyone with internet access has heard of Bitcoin. However, a closer look at conversations reveals a stark contrast: only a fraction of those who have heard of Bitcoin can explain its functionality and mechanics.

The Percentage of Bitcoin Knowledge

Estimating the percentage of people who truly understand Bitcoin is speculation. Based on a rough guess and considering factors like media coverage by celebrities such as John Oliver, around 10% of the population in developed countries might have a grasp of what Bitcoin is. This estimation, however, should be taken with a grain of salt.

Practical Understanding vs. Awareness

The true test of understanding lies not just in awareness but in practical implementation, such as buying, trading, or using cryptocurrencies. The ratio of individuals who know about cryptocurrencies to those who actively use them is far lower, making it a more reliable metric of genuine understanding.

Comparing Market Cap to Liquid Money Supply

Using U.S. M1 and M2 as a proxy for total liquid money supply, the disparity between those who understand cryptocurrencies and those who merely know about them becomes striking. The U.S. M2, a measure of the money supply, seasonally adjusted, is approximately 13.2 trillion. In contrast, the total market cap of all cryptocurrencies globally is around 325 billion. This means that, at most, only 2.3% of the liquid money in the U.S. is invested in cryptocurrencies, indicating a significant gap between awareness and practical use.

Continuous Growth and Learning

While the percentage of people who understand Bitcoin and cryptocurrencies is growing, the majority of those in developed countries were only recently aware of its existence. This awareness surged in the fourth quarter of 2017, marking a pivotal moment in the journey of cryptocurrencies into the mainstream.

Despite the growing interest and market activity, the space is still in its early stages. The exponential growth in market and interest should not mislead us into thinking we have reached a mature phase. There is still much to learn and explore, both for individuals and the global financial system.