Bitcoin has grown significantly, smashing many hurdles along the way. It has achieved news feats that initially seemed far-fetched. In May, the price reached an all-time high price of $63 000. The question in the minds of every crypto enthusiast is; what does the future hold for bitcoin? According to crypto analysts at cryptopredictions.com, Bitcoin is forecasted to hit the 100k USD mark by the end of this year.
One of the biggest concerns in order for BTC to achieve this price is bitcoin's mainstream adoption. Will it ever be accepted in the mainstream for transactions and payment? To understand where bitcoin is and what could happen in the future, it is imperative that we consider bitcoin’s S-Curve.
The S Curve
The S-Curves show the progress of a project and measure its performance. In technology adoption, the curve shows growth stages from innovation through maturity to stabilization. These stages include; `
- Innovators -2.5%
- Early adopters - 13.5%
- Early majority -34%
- Late Majority -34%
- Laggards - 16%
The adoption at each stage is premised on social and psychological profiles. The innovators are the tech enthusiasts, while the early adopters are the visionaries. The curves take off as the visionaries start to adopt the assets. Pragmatists jump in as the early majority while the conservatives join as the late majority. At the end of the curve are the laggards, who are majorly skeptics.
According to Geoffrey Moore’s theory, going through the gap between the early adopters and the early majority is called crossing the chasm. Crossing the gap is critical and involves using a beachhead strategy. The product targets a specific group to become the market leader.
Image source: ignitionframework.com
Current Bitcoin Position - Early Stages
Bitcoin is still in the early stages of the S curve. Therefore, investors will pump more dollars into the cryptocurrency as we move towards the end of the curve.
Rivaling the Internet
Luckily, bitcoin has emerged in an era with top-notch technological development. Thanks to technological, financial, and communication advancement, bitcoin can scale the adoption curve faster at a global scale.
To give you a clear picture, Bitcoins adoption is growing at a higher rate than the internet and modern technologies such as mobile phones. Currently, bitcoin has 135 million users and is projected to reach one billion users by 2025. On the other hand, the internet took 7.5 years to grow from 135 million to a billion users in 2005. Should these projections become true, bitcoin will achieve the same feat in half the time.
Bitcoin Asset vs Bitcoin Network
Bitcoin is portraying a dual adoption curve. We should, therefore, examine bitcoin as the asset and bitcoin as the network to get a clear picture of its future direction. The Bitcoin asset could mimic gold and become a global store of value because it is scarce, verifiable, and durable. Bitcoin, the network, on the other hand, has immense potential as a medium of exchange because it can process global and unregulated international transactions.
The Bitcoin asset is ahead of the BTC network. According to Micahel Levin, Bitcoin the asset has an adoption rate of 11.8%, placing it right in the early adopter’s category. Similarly, bitcoin the network is at 2.8%, meaning it is gravitating towards the early adopters. In general, bitcoin is at the early adopters phase.
According to survey monkey, about 29% of bitcoin owners hold bitcoin as a store of value, while 13% for the purchase of goods and services. As investors adopt bitcoin as a global store of value, its adoption as virtual money will also grow. The website survey monkey further argues that over half of the people who currently own Bitcoin have purchased it during 2020 and 2021. Given these are only two years and Bitcoin has been in existence for 12 years, these statistics are impressive and hint towards how fast Bitcoin popularity has been growing in the recent years.
Enter Lighting Network
Currently, bitcoin is in a critical stage of its adoption. When bitcoin is eventually adopted by the majority, the Lighting Network will have played a significant role in the adoption burst.
Essentially, lighting network technology adds a layer on the bitcoin blockchain enabling two people to transact outside the blockchain network. It enhances scalability, reduces cost, and speeds up transactions. According to Cointelegraph, the technology could support at least one million transactions per second, charging insanely low fees.
Lighting could be the beachhead used to cross the chasm. Ideally, the technology will help bitcoin transition from the early adopter group to the early majority as the adoption grows from using the bitcoin asset to the bitcoin network.
Tesla and Square have invested heavily in bitcoin. AMC is also planning to accept bitcoin payments while Fintech companies like Square and Paypal are also integrating bitcoin into their system. Ecommerce giants Amazon and Walmart are planning to develop products that support blockchain and digital currencies.
The institutional adoption is poised to grow as more companies follow suit. US banks are planning to roll out an initial bitcoin product that will enable them to buy, hold and sell bitcoin. This means that Americans will have the opportunity to invest in bitcoin through their banks.
In the past, banks have steered clear from offering crypto services. As a result, their customers have resorted to selling dollars in crypto exchanges. With the increasing bitcoin adoption, banks are forced to offer crypto services to their retail customers. Big banks like Morgan Stanley, Goldman, and JPMorgan are planning to offer bitcoin fund and wealth management services. With institutional adoption, bitcoin will get more use which could boost its value.
Government Regulations Will Boost Bitcoin Adoption
While bitcoin is quite a successful digital currency, it lacks stability due to its volatile nature. However, bitcoin could become more stable with wider uses and increased adoption. For this to happen, it requires endorsement from the government.
Regulations such as Know your customers will help greatly. For instance, the US is working on regulations to enhance crypto-tax reporting. Cryptocurrency regulations would give potential bitcoin investors much needed confidence. Companies would also adopt bitcoin payments and as a store value in the inflationary economic environment.
Without setting regulations that protect bitcoin users, mainstream adoption will be a challenge. However, the laws should be set in a way that does not create a central governing body and alter its decentralization attribute.
Some regulations are a major stumbling block in bitcoin adoption. In fact, some countries have even gone to the lengths of banning cryptocurrencies (the biggest one, being China). On the other hand, there are also some countries with a very positive approach to Bitcoin, one of such countries is El Salvador that has recently gone ahead and recognised Bitcoin as legal tender. El Salvador is hoping that Bitcoin will help them fight inflation that is in the country enormously growing.
After the government of El Salvador made the announcement about recognizing Bitcoin as legal tender, the price of Bitcoin jumped up by 6%. Interestingly enough, this was far lower than when Elon Musk posted his tweets about supporting Bitcoin. This is mostly due to the fact that the economy of El Salvador is not that big, were this announcement to be made by a different country with higher GDP (such as the US, China or Japan), the price of Bitcoin would most likely increase tremendously. Therefore, crypto issues should be resolved using supportive regulations to ensure wide acceptance.
Bitcoin ETFs Will be the In Thing
It is likely that Bitcoin ETFs will emerge sooner or later (currently they are not approved by the SEC). These investment instruments will provide an opportunity to invest in crypto in a traditional way. In other words, investors will be able to buy bitcoin from conventional investment brokers.
Investors do not have to be well versed in cryptos. They can easily add bitcoin to their portfolio with other traditional or retirement investment accounts. Bitcoin ETFs would therefore work as any other ETF, meaning that if Bitcoin price increased, so would the price of a share in the ETF. Another big advantage of Bitcoin ETF is that investors would get easy and secure access to Bitcoin, which can be currently a bit tricky (just remember how many crypto exchanges have been hacked in the past). So if Bitcoin ETFs were to be approved by the SEC, the popularity of Bitcoin and with it also its adoption would increase.
Final Word - Bitcoin is on a Growth Trajectory
In a nutshell, Bitcoin is smoothly transitioning from innovators to the early majority. In the near future, we can expect it to move into the late majority. However, this growth and success along the S curve will depend greatly on factors like government regulations and scalability. But if you are an investor, it’s not a bad thing to have some of your capital invested in Bitcoin (for portfolio diversification). Otherwise, you risk joining when it is too late, like the typical laggards.