The Path to Crypto: Elon Musk's X Secures Rhode Island License for Digital Currency Services

Elon Musk's social media company X took a major step towards enabling crypto payments by receiving approval for a digital currency license in Rhode Island last week. The license will allow X to provide custody, transfer and exchange services for both fiat currencies and digital assets. While X's payments feature is initially only expected to support fiat transactions, the infrastructure is being built so that crypto capabilities can be added seamlessly in the future according to sources close to the project.

The Rhode Island approval marks the 7th state money transmitter license attained by X so far, following New Hampshire, Missouri, and Michigan which were secured in early July. Acquiring state-level licenses is a legal requirement for any company transmitting money on behalf of users. By actively pursuing these licenses, X is clearly gearing up to roll out payments functionality to its over 230 million users in the near future.

While the crypto markets have endured a difficult year in 2023, X integrating digital asset services would be a huge boon for networks like Bitcoin. With deep liquidity and first mover advantage, Bitcoin stands to benefit the most from millions of new users gaining easy access to crypto investing and payments.

Mainstream Bitcoin Adoption Accelerating

X enabling crypto transactions does not happen in a vacuum. It is part of a broader shift towards mainstream Bitcoin adoption that has accelerated in 2023 despite market volatility.

Major financial institutions like Fidelity, Blackrock and Citibank have launched or expanded crypto trading services this year. Payment giants Mastercard and Visa have deepened their crypto integration by partnering with leading crypto exchanges. Regulators seem to be softening their skepticism as well - with the new Biden administration framework for crypto regulation focusing on consumer protection rather than stifling innovation.

Against this backdrop, X introducing hundreds of millions of users to crypto aligns perfectly with the trajectory towards mainstream adoption. While plenty of crypto exchanges and services exist already, the sheer user base of X makes it uniquely positioned to drive mass adoption.

X Payments to Boost Bitcoin Trading Volume

If a sizable portion of X's users buy, sell or make payments with Bitcoin, it can significantly impact trading volumes and liquidity for the flagship crypto asset.

For context, X's user base is larger than the combined customers of Coinbase, Binance, FTX and Crypto.com. If 10% of X users make just a small $50 crypto transaction per month, that is $1.15 billion of monthly Bitcoin trading volume. And that is still a tiny fraction of X's user base with a modest transaction amount.

As the most trusted and stable crypto asset, Bitcoin stands to capture the majority share of this new trading and transaction volume. More liquidity means less volatility, harder for large traders to move markets and more stable pricing - all big wins for long term Bitcoin investors.

Exposure to Younger Demographics

X's user base skews young, with over 50% of users below 35 according to internal user data. Millennials and Generation Z have shown the greatest willingness to adopt crypto compared to other age groups.

Younger users are also more likely to use Bitcoin for payments and transactions, not just investment. X enabling crypto payments gives Bitcoin exposure to the key 18-35 year old demographic early in their earnings and investing lifecycle.

As the wealth of millennials and Gen Z grows over the next decade, having Bitcoin top of mind early via X payments gives it a chance to become their crypto asset of choice. This benefits Bitcoin both in the short and long term.

X Executing Despite Bear Market Headwinds

The crypto markets have faced severe headwinds in 2023, with Bitcoin prices down 60% from all time highs. In this environment, it is commendable that X is sticking to its roadmap and continuing to build for the future.

Having a mainstream company like X ignore short term price fluctuations and keep innovating underscores that the crypto and Bitcoin revolution is here to stay.

Many observers wrote off the internet after the Dot Com crash in the early 2000s. Today, the internet permeates every aspect of our lives. Bitcoin and crypto may follow a similar trajectory, with this bear market just a bump in the road on the path to mass adoption.

X securing the Rhode Island license reiterates its commitment to keep pushing crypto innovation despite market conditions. If other companies follow X's lead, the long term growth story for Bitcoin remains intact.

Opinion

X securing state money transmitter licenses and gearing up to enable crypto services is an unambiguously positive sign for Bitcoin specifically and crypto broadly.

However, there are nuances to consider on how impactful X's crypto integration will be for Bitcoin in the immediate term. Much depends on the initial scope of their crypto capabilities, what assets they support, the user experience and how feature discovery is handled.

If the first version only allows Bitcoin purchases via bank transfer, that limits the addressable user base. Supporting crypto deposits and withdrawals is key to maximizing trading volume. The easier X makes discovering and using crypto payments, the faster mainstream user adoption can happen.

So while X integrating crypto services does accelerate Bitcoin mainstream adoption in principle, the devil is in the details on how seamlessly new users can start transacting in Bitcoin. There are many product and regulatory challenges still to be navigated. Nevertheless, this is undoubtedly a positive first step.

Prediction on the Topic

My prediction is that within the next 6-12 months, we will see X rollout basic crypto buy, sell and payment functionality to a subset of its userbase. This initial launch will support Bitcoin, Ethereum and a handful of other major crypto assets.

Initially, the crypto features may not be easily discoverable or highlighted within the main X app. But over time as X gathers more feedback, crypto will take a more prominent position in the X payments flow. Within 2 years, we could see 10%+ of X's monthly active users engaging in some form of crypto transaction on the platform.

This will make X one of the largest on-ramps into crypto, accelerating mainstream Bitcoin adoption in the process. But it will still take a number of years after the initial product launch for crypto to become 'mainstream' on X.

Should You Invest in Bitcoin Now?

With X poised to enable crypto payments, is now the right time to invest in Bitcoin?

On the positive side, X's large user base will likely boost Bitcoin trading volumes and liquidity when they launch crypto capabilities. Mainstream adoption of Bitcoin also appears to be accelerating despite the bear market. And buying during price dips often leads to higher long term returns.

However, Bitcoin prices could still fall further in the short term before finding a bottom. X's crypto integration may also take a while to ramp up. So timing the market perfectly is difficult. For long term believers in Bitcoin, dollar cost averaging into a position is better than trying to predict price movements.

So while X embracing crypto is exciting, there is a case for patience in investing at the right time instead of rushing into Bitcoin today. Evaluate your risk appetite, investment timeline and dollar cost average to smooth out volatility.

What Does Mainstream Adoption Mean for Bitcoin?

If Bitcoin goes mainstream via companies like X enabling crypto payments, what does it mean for the asset long term?

On the positive side, widespread adoption likely leads to less volatility, harder for large players to manipulate prices and a stable position as a global digital store of value. The Bitcoin brand becomes more trusted and established in consumers' minds. Merchant adoption expands, creating a virtuous cycle of usage driving more usage.

However, there are also risks like increased regulation with mass adoption. Governments may impose restrictive rules that hurt certain use cases if Bitcoin is perceived as a threat. Mainstream investors sometimes over-hype and then abandon 'trendy' assets quickly, hurting prices. And early Bitcoin adopters may find its anti-establishment roots watered down.

So while mainstream adoption does seem inevitable, it’s a mixed bag on how it impacts Bitcoin. The technology, brand and liquidity become unstoppable long term tailwinds. But the road to maturity for Bitcoin will still have bumps along the way even in the most optimistic mainstream adoption scenarios.

Conclusion

X securing a digital currency license in Rhode Island brings crypto payments on its platform one step closer. When hundreds of millions of X users eventually gain access to crypto services, Bitcoin is primed to benefit as the most trusted and stable asset for first-time investors.

This accelerates the mainstream adoption of Bitcoin amidst a wave of growing institutional and payment provider interest in the crypto markets in 2023. However, the extent of X's impact depends on the ease of crypto integration and how seamlessly new users can start transacting.

In the long run, widespread adoption seems inevitable but will bring both risks and rewards to the Bitcoin ecosystem. For believers in the technology, dollar cost averaging into a Bitcoin position is better than trying to time market peaks and troughs. X embracing crypto payments strengthens the arguments for long term Bitcoin bullishness. But as with any new technology, the road to maturity will have its ups and downs, even after adoption goes mainstream.