Bitcoin has had an amazing few months, and major traditional financial institutions are taking notice. Bitcoin’s trading value has been steadily increasing and is currently valued at over $13,000 on a fast track towards previous 2018 all-time highs. That puts the entire cryptocurrency market capitalization at about $410 BILLION with over 101 million users.
In a recent note, JPMorgan stated that Bitcoin’s 2020 surge could continue as it outpaces gold as an “alternative” currency. This is a huge turnaround from the firm's previous stance on bitcoin, whose CEO, Jamie Dimon previously famously slammed bitcoin as a “fraud” in 2018, that was “worse than tulip bulbs” and he would fire any employee trading bitcoin for being “stupid”.
So what changed in the last few years to cause a traditional, financially conservative organization like JP Morgan Chase to do a complete 180 on Bitcoin and cryptocurrency? And why should nonprofits do the same and start accepting cryptocurrency donations right now?
Why is Cryptocurrency better than gold?
According to the research from JP Morgan, Bitcoin is favored over gold by millennial investors.
Cryptocurrency is both a store of value and a means of payment. Gold for the most part is a store of value and isn’t a transactable currency. This gives cryptocurrency a leg up over gold. As more organizations accept cryptocurrency as a means of payment, the higher the utility and value of it.
The physical gold market is worth $2.6 trillion, Bitcoin would need to increase over 10x in price to outseat gold as the reigning champion of currency. However as JPMorgan identified, major organizations and millennials are actively buying into Bitcoin and causing its market value to increase. That means we could soon be trading Bitcoin at $50,000. Some people like the Winklevoss Twins have even predicted Bitcoin will rise to $500,000 per coin. Keep in mind there will only ever be 21 million coins in circulation with no way to create more. This fixed supply is a key feature that protects it from inflation like we see in traditional fiat currency.
Nonprofits that accept cryptocurrency donations will stay ahead of the curve and could be beneficiaries of large sum donations as a result, especially because of the tax benefit for donors.
Here’s what's got JP Morgan excited:
Increased favorability over gold by millennial investors, who will become the dominant investor class over the next few decades
Bitcoin has the potential to double or triple in the near future, even if it only increases in popularity by a small amount among investors
The more economic agents (that includes nonprofits) that accept cryptocurrency, the higher its utility and value is. To put it simply, simply by accepting crypto, you help increase its value!
There is far more potential for a long term upside for cryptocurrency as it’s use and utility increase.
What does Bitcoin adoption mean for nonprofits?
Nonprofits can no longer afford to sleep on new and diverse revenue channels like bitcoin and cryptocurrency donations. Just like it took a while for nonprofits to accept the emerging technology of online credit card payments in the early 2000s, it’s taken a while for the nonprofit space to wake up to cryptocurrency, and while early adopters like The Water Project and Save The Children have been accepting cryptocurrency since at least 2014, other major nonprofits, spurred on by the uncertainty created by COVID-19 have started to accept cryptocurrency in 2020, often to great success.
Other forward-thinking nonprofits need to identify these trends and act on them by accepting cryptocurrency donations. Otherwise, they are at risk of being left behind.
As more individuals, companies, and nonprofits use, buy into, mine, and hold Bitcoin, the value will continue to increase. Value increases will mean capital gains which are taxable according to the IRS in the United States, as well as many tax regulators globally. Bitcoin and cryptocurrency are treated as property assets by the IRS in the United States and many other jurisdictions, and thus, cryptocurrency donations can be used by savvy investors to offset their capital gain taxes donating cryptocurrency directly to nonprofits.
Why are Bitcoin donations better for your nonprofit?
When PayPal recently gave its 346 million users the ability to buy, sell, and exchange cryptocurrencies combined with the over 101 million existing cryptocurrency users, the number of individuals with access to cryptocurrency assets increased to almost half a billion! This means a potential half a billion new potential donors for nonprofits, and this number is growing daily - as is their wealth.
Nonprofits looking to diversify their sources of donation revenue, and attract a younger, broader donor base can’t afford to ignore cryptocurrency donors anymore. It is essential for nonprofits to start accepting cryptocurrency donations right now, just like it was essential to add a credit card donation option to your website in the early 2000s.
Don’t get left behind, contact the team at The Giving Block today to discuss how your nonprofit can get it’s very own bitcoin donation widget and start easily accepting cryptocurrency donations right now!
Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.