Bitcoin's Consumer Adoption Phase

Over the past seven years the Bitcoin industry has made rapid gains and continues to grow. The adoption of new technology tends to start off as a niche interest amongst enthusiasts yet accelerates as more people participate. It was only 15 years ago that people began using basic cell phones and now almost everyone has a computer in their pocket.

Barry Silbert, the founder of Digital Currency Group and the Bitcoin Investment Trust, spoke about the “5 phases of Bitcoin adoption” in a Forbes interview. These phases are:

Experimental
Early Adopter
Venture Capital
Wall Street
Consumer Adoption

Venture Capital Phase

In 2013, VC money poured into new Bitcoin companies to help kick-start the industry. Since then there’s been a total of $1.14 billion invested in the crypto space.

Most of this investment capital went into laying out the groundwork for Bitcoin consumer services such as wallets and exchanges. Users need payment gateways to easily buy coins and secure wallets to store their keys. Without these integral services, Bitcoin would be inaccessible to most people.

Wall Street Adoption Phase

According to Barry Silbert’s estimate, 2015 would mark the beginning of the Wall Street adoption phase. It just so happens that the year started off with the New York Stock exchange investing into Coinbase, the world’s largest Bitcoin hot wallet provider.

There couldn’t have been a more symbolic event for Wall Street adoption than the biggest exchange on the block getting skin in the game. Even the chairman of the NYSE Jeffrey Sprecher praised Bitcoin in this interview.

Other Wall Street companies such as Nasdaq also jumped on the blockchain bandwagon. That said, since Bitcoin is a decentralized payment network many of these centralized companies have been looking into private blockchains.

Last year also introduced new BTC legacy investment vehicles such as the Bitcoin Investment Trust on the OTC markets and the Bitcoin Tracker One launched on the Stockholm Nasdaq.

Consumer Adoption Phase

Now that all the infrastructure is in place and institutional investors have skin in the game, Bitcoin is being primed for the consumer adoption phase. The s-curve of the technology life cycle starts off as close to exponential and eventually hits a peak after market saturation.

Looking at the adoption of other technological trends like cell phone and Facebook users we can see a similar growth curve.

Source: Wikipedia.com

The number of Bitcoin services offered to the consumer appears to be growing. Just a few years ago it was somewhat difficult for beginners to purchase bitcoins. It usually meant sending an expensive wire transfer to shady exchanges on the other side of the world.

Making bitcoin easy to purchase is a necessary ingredient to attract new users into the space. Today there are many convenient options for people to purchase coins. Here’s a list of ways that people can convert bitcoins in and out of fiat:

Bank wire
Online interac
Bank drafts
Western union
Money orders
Bitcoin ATMs
Credit cards
Paypal
Gift cards
Cheques
Direct bank transfer ETF
Precious metals
Payment processors
In person

Right now there are 610 bitcoin ATMs around the world and that number is growing every year.

Source: Statistica.com

In countries like Canada you can purchase a bitcoin voucher at 6000 stores across the nation.

Coinbase, one of the most popular on-ramps into bitcoin wrote a post in 2015 stating:

The majority of Coinbase users now reside outside the U.S (international users grew from 44% to 51% of our total user base in 2015).

Source: Coinbase.com

The company claims to serve 3.7 million users and 43,000 merchants in 32 countries.

Blockchain.info is another popular web wallet service showing an exponential growth of users.

It’s uncertain how many of these wallets are unique users vs old users generating new accounts. I assume that 7.5 million unique users would have a significant impact on the price of bitcoin, pushing it to levels much higher than its current valuation.

Source: Blockchain.info

Bitpay, the world’s leading bitcoin payment processor recently stated that consumer transactions are on the rise. There’s even been a 1747% increase in transactions coming from Latin America.

Source: Bitpay.com

There’s also a progressive increase of transactions happening on the main Bitcoin network.

Source: Blockchain.info

We can see an increase in direct peer-to-peer transactions through services like Localbitcoins. This service is useful in countries that don’t have an exchange available. It likely shows organic growth due to the premium charged on most sales.

Source: Coin.dance

Impact on the Markets

Any growth in user adoption will have a positive impact on the price of bitcoin. The reason for this is due to the scarcity of bitcoin being hard capped at 21 million. At the time of this report there are approximately 15.5 million coins in circulation with an annual inflation rate of 9%. In July the mining rewards will be cut in half, reducing the inflation to 4.5%.

In the event that Bitcoin follows a similar adoption curve as other technology, there will not be enough coins in circulation for everyone to own a single coin. Since each unit is divisible by 100 million, it’s still entirely possible for bitcoin to be a viable medium of exchange.

Bitcoin is currently trending in a bull market and this may just be the beginning. In a recent Moneyweek article, Dominic Frisby compares Gartner’s technology hype cycle to Nasdaq during the dot-com bubble and the bitcoin price charts.

Source: Gartner.com

Source: Wikipedia.com

Source: Blockchain.info

A similar pattern is also seen when looking at Google trends for Bitcoin searches.

Looking at the geographical location of Bitcoin search trends we can see an increased interest in non-Western countries like Ghana and Eastern Europe. This shows that Bitcoin interest may be spreading to new geographical locations.

Some countries in the world have a greater need for bitcoin as a hedge against hyper-inflation and capital controls.

Sources: Google.ca

Bitcoin is being accepted more by the mainstream as an investment for diversifying one’s portfolio. Given the current trajectory we should continue to see exponential growth in adoption.

Security is the biggest obstacle for user adoption but this is becoming more streamlined with hardware wallets.

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Rocky

Crypto trader and investor. My preferred style is swing trading and longer term accumulation plays. I help coach traders and share my trades over at skillincubator.com