Mainstream Adoption of Bitcoin Will Send Price Soaring
The pain inflicted by the crypto markets has been extreme this year. It’s become clear that the market ran way too high, way too fast in 2017. Many traders knew a severe correction was forthcoming, but I doubt many predicted the correction (now a full-fledged bear market) would be this extreme. While the markets have been painful, Bitcoin (BTC) serves a bigger purpose than just making money in the markets. To some, that purpose is a worldwide digital currency that can eventually be used to purchase anything. To others, the purpose is a store of value to prevent against the inflation that plagues FIAT currencies. Either way, it’s important to remember that this is just the beginning.
Early Phase of Adoption
Bitcoin is still in the very, very early phase of adoption. Let’s look at the graph below.
The technology adoption life cycle is a sociological model that describes the adoption or acceptance of a new product or innovation, according to the demographic and psychological characteristics of defined adopter groups.
Many consumers still have no idea what Bitcoin is. When people google the term Bitcoin, they are likely to get the following definition: Bitcoin is a digital currency that is not backed by any country’s central bank or government. Bitcoins can be traded for goods or services with select vendors. But the truth is that Bitcoin can’t be used to buy things that would be useful for most people. Consumers can’t use Bitcoin to buy groceries, pay the cable bill, pay for medical expenses, buy a car, or purchase a home. For years, Expedia (one of the world’s largest travel booking engines) allowed consumers to use Bitcoin to make hotel reservations. But even that was taken away in June.
Clearly, Bitcoin has yet to achieve its intended goal. Based on the graph above, I can confidently claim that Bitcoin is still in the innovators phase. In fact, one big innovation in the future may help push Bitcoin into the early adoption phase.
Although Bitcoin took the world by storm in 2017, one big problem has always loomed large; scalability. The ability to scale to the required size was a concern when Bitcoin was first introduced to the world and it remains a problem that needs to be addressed. What does scalability entail? Well, let’s look at the visual below.
At present, Bitcoin is only capable of processing approximately 7 transactions per second. Compared to PayPal, Ripple, and especially Visa, Bitcoin needs to improve dramatically. One way that Bitcoin may be able to perform significantly better is through the lightning network.
It’s currently estimated that the lightning network will have the potential to process 1 million transactions per second. While that sounds great on paper, it’s still just theoretical. Once the network becomes operational, its true greatness will be determined.
Although Bitcoin has had a rough 2018, it’s important to recognize that the future still burns bright. Bitcoin is still in the innovators phase of adoption. And while the lightning network is set to address Bitcoin’s biggest hurdle, better days are ahead.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.