Bitcoin Mania: Assessing Cryptocurrency’s Future Growth Potential
Bitcoin’s skyrocketing price — zooming 1,600% from $1,000 at the start of 2017 to $17,000 by early December 2017 — dramatically increased awareness and interest in cryptocurrency and blockchain.
Media coverage spans the gamut from fanatical to cautionary to incredulous. Google searches for “bitcoin” reflect the rapidly increasing curiosity and FOMO:
The breathless media coverage and increasing mania around bitcoin could lead you to believe that all of your friends and neighbors are already rolling in bitcoin wealth. People indeed are jumping rapidly on the bandwagon: Coinbase, one of the largest exchanges, recently is adding 100,000 new accounts every day. Yet despite recent rapid growth, Bitcoin ownership remains highly concentrated: Bloomberg estimates that a mere 1,000 people own 40% of all Bitcoin.
What percent of the global population actually owns any cryptocurrency? Reliable numbers are scarce, with estimates ranging from three to fifteen million people owning cryptocurrency, and growing fast. Using the high end of these estimates and allowing for growth suggests some 35 million people own cryptocurrency as of December 2017, which equates to only 0.5% of global population. For context, compare this figure with estimates of other financial and technology products:
|Bank Acct||Mobile Phone||Internet Access||Cryptocurrency|
Comparing ownership with bank accounts, mobile phones, and internet access illustrates the massive growth potential remaining for cryptocurrency. Moreover, the pace of technology adoption is accelerating: for example, telephones achieved 40% market penetration in 39 years, whereas smartphones reached the 40% threshold in only 10 years. The adoption curves of devices such as color TV, smartphones, and the internet are exponential, producing the classic J-shaped curves beloved by entrepreneurs and VCs worldwide.
Over a product or technology’s full life cycle, however, growth curves actually resemble a logistic or S-shaped curve. The factors affecting the S-curve for a particular technology include:
- Time in incubation phase (with low penetration / adoption rates);
- Steepness / slope of curve (once adoption accelerates)
- Maximum value (mature penetration / adoption rate)
Considering 2017’s accelerating price, participation, and awareness, it’s clear that after eight years bitcoin is transitioning from its incubation phase to its hockey-stick growth phase. Additionally, the slope of the adoption curve could be very steep if recent trends continue.
The most critical factor for cryptocurrency’s long-term potential is the mature adoption rate. Will mature adoption rates for cryptocurrency resemble those of bank accounts and mobile phones? Or will adoption be more limited and niche, as with game consoles (~40% of USA adults) and e-readers (<20% of USA adults)?
Time will tell of course, but clearly, cryptocurrency’s mature adoption rate will be a function of its everyday utility and ease of use. As of the end of 2017, cryptocurrency still has far to go before it becomes easily usable by a significant percentage of the global population. Consequently, cryptocurrency’s mature adoption rate is truly unknowable at this early stage.