Analysis

Bitcoin is Hot but it is as Cool as Vegas?

Is it possible to prove that cryptocurrency is in the same league as Vegas and Macau? We can try:

At the end of fiscal 2016 Vegas as whole reported $9.6 billion in gaming revenue (All of Nevada including Tahoe reported $11.1 billion).

Macau gaming revenue has declined two years in a row, reporting revenue of 223.2 billion patacas (or $27.8 billion) for end of 2016

Cryptocurrency gambling happens online and is mostly unregulated. For years, Las Vegas was able to constrain online gambling by forced credit card processors to refuse to do business with online gaming firms. But now with Bitcoins and other cryptocurrencies, it’s much more difficult to make money-laundering charges stick.

So how much money are cryptocurrency casinos pulling in? It is impossible to estimate accurately, but we can make a few educated guesses.

The total market cap for all cryptocurrencies, on June 5th of 2017 is $96 billion.  Very little of the alternate cryptocurrencies (“altcoin”) are accepted at online casino, so let’s work with the current market cap (or “float”) of Bitcoin which is about $47 billion.

If we take the extraordinary assumption that the “rake-off” for Bitcoin casinos is as high as 10%, we still only come up with revenue of $5 billion. So at best, the size of the Bitcoin gambling industry is only half the size of Vegas and less than 20% the size of Macau.

But wait, let’s look at this from another angle.

Revenue from the online gaming industry was estimated to be $42 billion in 2016, rising to nearly $60 billion in 2020. Assuming $5 billion of that market is transacted in Bitcoin, that works out to a market penetration of 12%, with the rest of the market funded by bank wires and credit cards.

Many articles have been written about the superiority of Bitcoin over credit cards for use on gaming sites, but it’s worth emphasizing Bitcoin’s main advantage that the U.S. pretty well made it illegal for their citizens to use credit cards  to fund their gambling habit.

Of course, some US states have gone so far as to allow online gaming for residents as long as they register and gamble only in their own home state, but the list of legal online gambling site is pathetically small.

Meanwhile, some Bitcoin gambling firms reported growth rates of more than 1000% back in 2015, even before the latest boom started.

Will Bitcoin gambling become bigger than Vegas and Macau combined? And when will it happen? The answers just might be don’t bet against it and sooner than you.

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