Bitcoin has nailed another monstrous use case for countries and individuals alike to store their wealth in the mathematical genius. Many small countries have much of their GDP tied up in the remittance market. Ultimately, price action in the short term for Bitcoin is not even a reliable metric.
One of the most profitable use-cases of Bitcoin is the overseas remittance business. It has a value of more than $500 billion every year, and a major share of the money goes to low-middle-income countries.
Valuates Reports recently issues The Digital Remittance Market which is segmented by Remittance Channel ( Banks Digital Remittance and Digital Money Transfer Operators ), by Remittance Type ( Inward Digital Remittance and Outward Digital Remittance.), by End User (Business and Personal). According to the report the Global Digital Remittance Market size is expected to grow from USD 2,345.32 Million in 2019 to USD 9,102.30 Million by the end of 2025 at a Compound Annual Growth Rate (CAGR) of 25.35%.
Major factors driving the growth of digital remittance market size are, rising smartphone penetration, the increasing number of digital-savvy customers opting for digital remittances, increasing internet penetration, and a rise in payment automation and digitalization.
Rapid growth in industrialization and urbanization is drawing the population of various semi-rural and rural areas to urban parts. People are moving in search of education or employment to different locations and countries. This, in turn, increases the number of cross-border transactions, thereby fueling the digital remittance market size.
This, in part, is reason as to why I believe Bitcoin is set to nail $100K by the end of 2021.
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By having institutions and big banks run the remittance market in such a traditional way, countries that depend on overseas money inflow will suffer. In many of the African countries, remittance inflows account for a third of the entire GDP. So if they are charged with high cross-border transfer fees, it will limit their buying power, which will not help increase the demand.
Therefore, we need to start using a payment system that pairs cryptocurrencies like Bitcoin and reduce peer-to-peer transfer costs. When we have a network with zero intermediaries, it will automatically start benefiting recipients of remittances.
In developing countries, the financial system is usually unstable and cannot be relied upon, so banks have no other choice but to charge high fees for remittance payments.
The costs for sending money overseas can reach up to an astonishing 10% of the transaction if banks are involved and twice that if informal means are utilized by both migrant workers and family members back at home. Without a doubt, this is where blockchain technology can contribute to society by reducing costs considerably.
One way to decrease the point of failures is to increase the amount of intermediaries meeting demand, rather than centralizing authority to local banks charging ridiculous tax.
As these intermediaries increase to meet the demand, they start to cut the transaction fee, increasing the amount the receiver ends up paying. Thanks to its efficient network of approving transactions, Blockchain technology can streamline a process that could otherwise take multiple days by removing intermediary parties.
The main problem in emerging countries like Africa is mobile penetration. According to Statista, it is supposed to hit the 50% mark by 2025. When mobile penetration goes up, people will have easier access to applications like mobile wallets. With dozens of companies entering this space, we will see blockchain-powered wallets being an integral part of remittances.
The Blockchain is a disruptive technology, but it’s not designed to make competitors obsolete. Blockchain partners with banks and money transfer operators to give them a more streamlined way to send money worldwide. By strategically incorporating blockchain integration within their platforms, money transfer operators will take advantage of the increasingly popular crypto-currency landscape.
As we have already seen, El Salvador switched their legal tender to Bitcoin and in so doing, saved around $2-3B immediately from remittance payments. More and more small countries that have been oppressed or under the thumb of larger empires will naturally flock to this technology.
This will ultimately push the price, drive adoption, increase the network size, scale the amount of transactions on the lightning network, and save peoples’ purchasing power.
I believe this will be a massive point of contention moving forward.
Until Next Time Guys, Think Free & Stack Sats!