Bitcoin Adoption is in its infancy

November 25, 2019

Price Does Not Always Reflect True Value

After 10 years in existence, the question of if and when mass crypto adoption occurs is still up to debate in the cryptocurrency space.  Humans historically think in linear scale. Once a personal investment is made, it is in our nature to believe in a steady, linear rise higher. Against the background of a technologically exponential environment, bitcoin lends itself to allowing exponential adoption growth rates along with volatile pullbacks.  To be accepted in mainstream, bitcoin gets adopted and THEN rises in value. It doesn’t get adopted because its risen in value, it RISES in value because it is adopted. This is why the bitcoin price runup of 2017 created unfair, inflated prices based upon utility as opposed to true value. It was not a sustainable fair market price, and quickly rejected. Value MUST be driven by mass usage and commensurate adoption rates, THEN go up in price. These are birth pains of a new currency self-adjusting to its respective auction market.

What is Mass Adoption?

Mass adoption means governments globally have created an enabling environment for blockchain and cryptocurrency to flourish or adopted the technology in their own practices.  Mass adoption needs to be specified according to the specific use case. Mass adoption as a store of value is different from mass adoption as a payment method or mass adoption of smart contracts.  Over the course of the last 10 years we have barely gone through “mass awareness.” The majority of people, in the U.S. at least, have heard of Bitcoin, and from rough estimates, perhaps 2-5% of Americans have used it. When that surpasses maybe 10%, then mass adoption has truly begun.  Mass adoption of crypto would mean that its use would be an ordinary function of daily use.  Mass adoption will take momentum when the general public is able to access, purchase, hold and use cryptocurrencies without having to understand the underlying technology.  Just as everday people can turn on a PC without knowing or understanding how it really works inside.  Current payment methods must be displaced by faster opportunities in everyday life to pay for goods and services using cryptocurrency.  Global acceptance requires a safe, easy and inexpensive and reliable platform to easily transact.  A number of stages are required for mass adoption of cryptocurrencies to take foothold. The first stage was awareness and the next is institutional adoption to enable institutional, political and regulatory acceptance.  This second phase will require end users and institutions to transact with eachother with confidence.  This process took two decades to fully develop in the case of e-commerce.

So When Do We See It?

A lot slower than the public thought two years ago during the Bitcoin mini-bubble of 2017.  One key ingredient for mass adoption is liquidity and right now few marketplaces have the volume and infrastructure required.  When we attempt to project growth of the crypto industry, we see three distinct market areas, each of which will have its own adoption curve. In an organic adoption cycle, grassroots awareness spreads the word, accelerating adoption in the retail world and everday users.  Large scale commercial areas take notice and take action to monetize the opportunity to get first mover advantage.  Banks and payments businesses need to consolidate these solutions to provide any efficient global service.  This would signal adoption in the institutional segment.
This pattern is playing out textbook in cryptocurrency markets right now. In the beginning, crypto was limited mostly to techies and math aficionados. Soon after this it grew into financial speculation in the retail space.  Businesses like brokerages, exchanges and payment services popped up and are now servicing this market. Right now major institutions like Fidelity, JPMorgan and other big players are servicing parts of the crypto value chain.  With all three areas now on the adoption curve, we are likely moving into the second inning of mass adoption.  This phase will require government regulations to accomodate the indisputable growth and provide for a safe and fair market.  The historical analog here would be the development of e-commerce on top of the internet, taking 20+ years for full global adoption.  Even the brightest back then underestimated the timeline.  The rate of adoption for digital currency will likely be parabolic and in less than half that time as it is will be integrated as Internet 2.0

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