The Four Phases of Bitcoin Growth

[freebird]

Hello all,

As I've been enjoying the recent rally, I've been trying to think about the big picture to keep from getting an itchy sell finger.

I think there are four phases of growth of bitcoin, from its creation to mass adoption. Here they are and the price ranges for each.

Phase 1. Libertarian Utopians and Techno-Geeks.
Price range: 0 to $250.
Explanation: These are the very early adopters, mostly comprised of two types of people (somewhat overlapping): idealistic folks who believe in the cryptocurrency movement as a way to reduce the power of government and the corrupt banking establishment, and software/web developers and others who are way ahead of the curve on studying and adopting revolutionary new technologies.
Timeline: This phase ended in the spring/summer of 2013.

Phase 2. Hedge Funds and Accredited Investors
Price range: $250 to $2,000.
Explanation: Starting in fall 2013, when bitcoin was in the $100s and $200s, the Bitcoin Investment Trust launched on Second Market, enabling high-net-worth investors to invest in bitcoin more easily and with less risk, through a credible fund. We can expect this kind of investment to keep increasing as more smart money flows in and bitcoin goes up in value over the next several months. Meanwhile, wealthy people in other countries, especially China, are also getting in, since they don't have as many investment opportunities there compared to Americans. This will sustain the momentum. There could be big corrections during this phase, but probably not any huge crashes anymore like what we saw in 2011 and early 2013 -- unless the government steps in and tries to over-regulate bitcoin or some major countries ban it. However, expect there to be at least some increase in government regulation as the big money players will want this because it would be bullish for their investment (i.e. making a safer environment for bitcoin to become part of the mainstream financial landscape). Some of the uber-libertarian types may take their profits and get out in this phase, as they discover that bitcoin is not going to be a way to overthrow the government, but instead that making money will take precedence over ideological motives for most people involved in bitcoin from this stage onward.
Timeline: This phase began in mid to late 2013 and will continue until the first bitcoin ETF is launched on the mainstream stock market, perhaps sometime before the end of 2014.

Phase 3. Ordinary Investors
Price range: $2,000 to $10,000.
Explanation: When the first bitcoin ETF is approved and available for trading on the New York Stock Exchange or Nasdaq -- most likely the Winklevoss Bitcoin Trust -- that will be like bitcoin's IPO. It will enable the average person to feel comfortable buying bitcoin in a way they are familiar with, i.e. through their mainstream online brokerage account, and they will be able to use their 401(k) funds to do so. This will open up a huge amount of new capital to flow into bitcoin, driving up the price by several more times in only one or two years. Bitcoin will be marketed to ordinary investors as "the new gold," a "digital gold" which is a better store of value than the traditional metal, and it will likely capture an ever-increasing market share of investors looking for an alternative to gold, for a few percent of their portfolio. It's quite likely that at some point in this phase we'll switch to using mBTC (millibitcoins) as the unit, because this will make it easier for people psychologically to invest smaller amounts of money and will set the stage for more user-friendly and widespread use of bitcoin in commerce.
Timeline: This phase probably starts sometime in 2014 and goes at least a couple of years.

Phase 4. Mass Adoption for Commerce
Price range: Something over $10,000. Who knows how much higher it goes, but eventually it will level off and grow more slowly.
Explanation: Once bitcoin has established itself as a totally mainstream investment and store of value, owned by hundreds of millions of people, and the price growth has slowed down to something less than a "hot tech stock" and more like a steady 10-20% increase per year, then people will start using bitcoin en masse for commercial transactions. Of course at this point the transactions will be in mBTC, since BTC would be extremely cumbersome by then for making normal purchases (people will prefer a unit that is closer to the value of a dollar or a euro, rather than dealing with amounts like 0.0001 to buy a book on Amazon or whatever). I suspect that mass use of bitcoin for commerce won't really materialize until the phases of rapid price gain have ended -- until then, bitcoin will be for hoarding, as a premier store-of-value asset. But eventually the point of saturation will be reached and people will feel like the era of massive gains are over and they'll feel more comfortable actually spending bitcoin.
Timeline: This phase will probably start anywhere from 2015 to 2018, depending on many factors -- and assuming that everything goes according to the outline above in the previous phases, without any major bumps in the road.

So, what do you think of this phase-by-phase prediction?

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[windjc]

Hello all,

As I've been enjoying the recent rally, I've been trying to think about the big picture to keep from getting an itchy sell finger.

I think there are four phases of growth of bitcoin, from its creation to mass adoption. Here they are and the price ranges for each.

Phase 1. Libertarian Utopians and Techno-Geeks.
Price range: 0 to $250.
Explanation: These are the very early adopters, mostly comprised of two types of people (somewhat overlapping): idealistic folks who believe in the cryptocurrency movement as a way to reduce the power of government and the corrupt banking establishment, and software/web developers and others who are way ahead of the curve on studying and adopting revolutionary new technologies.
Timeline: This phase ended in the spring/summer of 2013.

Phase 2. Hedge Funds and Accredited Investors
Price range: $250 to $2,000.
Explanation: Starting in fall 2013, when bitcoin was in the $100s and $200s, the Bitcoin Investment Trust launched on Second Market, enabling high-net-worth investors to invest in bitcoin more easily and with less risk, through a credible fund. We can expect this kind of investment to keep increasing as more smart money flows in and bitcoin goes up in value over the next several months. Meanwhile, wealthy people in other countries, especially China, are also getting in, since they don't have as many investment opportunities there compared to Americans. This will sustain the momentum. There could be big corrections during this phase, but probably not any huge crashes anymore like what we saw in 2011 and early 2013 -- unless the government steps in and tries to over-regulate bitcoin or some major countries ban it. However, expect there to be at least some increase in government regulation as the big money players will want this because it would be bullish for their investment (i.e. making a safer environment for bitcoin to become part of the mainstream financial landscape). Some of the uber-libertarian types may take their profits and get out in this phase, as they discover that bitcoin is not going to be a way to overthrow the government, but instead that making money will take precedence over ideological motives for most people involved in bitcoin from this stage onward.
Timeline: This phase began in mid to late 2013 and will continue until the first bitcoin ETF is launched on the mainstream stock market, perhaps sometime before the end of 2014.

Phase 3. Ordinary Investors
Price range: $2,000 to $10,000.
Explanation: When the first bitcoin ETF is approved and available for trading on the New York Stock Exchange or Nasdaq -- most likely the Winklevoss Bitcoin Trust -- that will be like bitcoin's IPO. It will enable the average person to feel comfortable buying bitcoin in a way they are familiar with, i.e. through their mainstream online brokerage account, and they will be able to use their 401(k) funds to do so. This will open up a huge amount of new capital to flow into bitcoin, driving up the price by several more times in only one or two years. Bitcoin will be marketed to ordinary investors as "the new gold," a "digital gold" which is a better store of value than the traditional metal, and it will likely capture an ever-increasing market share of investors looking for an alternative to gold, for a few percent of their portfolio. It's quite likely that at some point in this phase we'll switch to using mBTC (millibitcoins) as the unit, because this will make it easier for people psychologically to invest smaller amounts of money and will set the stage for more user-friendly and widespread use of bitcoin in commerce.
Timeline: This phase probably starts sometime in 2014 and goes at least a couple of years.

Phase 4. Mass Adoption for Commerce
Price range: Something over $10,000. Who knows how much higher it goes, but eventually it will level off and grow more slowly.
Explanation: Once bitcoin has established itself as a totally mainstream investment and store of value, owned by hundreds of millions of people, and the price growth has slowed down to something less than a "hot tech stock" and more like a steady 10-20% increase per year, then people will start using bitcoin en masse for commercial transactions. Of course at this point the transactions will be in mBTC, since BTC would be extremely cumbersome by then for making normal purchases (people will prefer a unit that is closer to the value of a dollar or a euro, rather than dealing with amounts like 0.0001 to buy a book on Amazon or whatever). I suspect that mass use of bitcoin for commerce won't really materialize until the phases of rapid price gain have ended -- until then, bitcoin will be for hoarding, as a premier store-of-value asset. But eventually the point of saturation will be reached and people will feel like the era of massive gains are over and they'll feel more comfortable actually spending bitcoin.
Timeline: This phase will probably start anywhere from 2015 to 2018, depending on many factors -- and assuming that everything goes according to the outline above in the previous phases, without any major bumps in the road.

So, what do you think of this phase-by-phase prediction?

What do I think? I think this is as plausible as any prediction. 

I think that mass adoption for commercial use will drive the price way past 10K if that every happens.

[dnaleor]

good analysis, although the price levels can not be predicted...
But I guess you are right about the first phase, that phase has ended.

[freebird]

What do I think? I think this is as plausible as any prediction. 

I think that mass adoption for commercial use will drive the price way past 10K if that every happens.

Could be. Maybe eventually as high as $100k. But it would probably happen very gradually in that stage.

Any thoughts on the earlier phases?

I think one of the most important questions within the next year will be how the bitcoin community reacts to the inevitable push for more government regulation. The hedge fund people and other wealthy investors who got in this year are going to want bitcoin to become something more mainstream and less of an ideological movement. I bet there will be a lot of controversy as we're already seeing with the idea of coin validation, etc.

I personally have mixed feelings, since I do like the idea of bitcoin as taking power away from big banks and putting it in the hands of the people. But on the other hand, I also want bitcoin to go mainstream, and I think the government and/or the banks themselves would stop that from happening unless there is more regulation.

The next year is going to be the make-it-or-break-it period for bitcoin. Maybe there will be a fork and there will end up being two types of bitcoin, the regulated kind which will soar in price as an investment, and the unregulated kind which will be extremely risky to own and mostly used for buying drugs, evading taxes, etc.

[revans]

Wish making dressed up as cogent analysis. Embarrassing and ridiculous.

[freebird]

Wish making dressed up as cogent analysis. Embarrassing and ridiculous.

Which part of my argument, specifically, do you disagree with?

I'll admit that getting to Phase 4 is maybe less than a 25% chance, since there are a lot of things that could go wrong between now and then. But getting to Phase 3, I'd say at least a 50% chance. And we're already in Phase 2.

[glendall]

I'd say your 4 stages are pretty reasonable, thanks for the read.

[Manna]

Nice concept, very reasonable. Hope your prediction is right that the ETF application will not last more than 1 year.

[wxg10]

Buffet vs. Keiser
http://betsofbitco.in/item?id=1446

[freebird]

Nice concept, very reasonable. Hope your prediction is right that the ETF application will not last more than 1 year.

I hope so too! To be honest, I don't know how long ETF applications usually take before approval. But if it's not approved next year, then presumably in 2015. I wouldn't think it would take more than 2 years. Or else it'll be rejected, which would be a shame. But I suspect it'll just be a matter of time before some Bitcoin ETF is approved.

Anyone here know how long it usually takes for ETFs to be approved?

[BittBurger]

Wish making dressed up as cogent analysis. Embarrassing and ridiculous.

So have *all* of your analyses thus far, which, by the way, have all been completely, dead, wrong.

[redwraith]

Wish making dressed up as cogent analysis. Embarrassing and ridiculous.

Yes, just like most of your posts

[mvidetto]

Hello all,

As I've been enjoying the recent rally, I've been trying to think about the big picture to keep from getting an itchy sell finger.

I think there are four phases of growth of bitcoin, from its creation to mass adoption. Here they are and the price ranges for each.

Phase 1. Libertarian Utopians and Techno-Geeks.
Price range: 0 to $250.
Explanation: These are the very early adopters, mostly comprised of two types of people (somewhat overlapping): idealistic folks who believe in the cryptocurrency movement as a way to reduce the power of government and the corrupt banking establishment, and software/web developers and others who are way ahead of the curve on studying and adopting revolutionary new technologies.
Timeline: This phase ended in the spring/summer of 2013.

Phase 2. Hedge Funds and Accredited Investors
Price range: $250 to $2,000.
Explanation: Starting in fall 2013, when bitcoin was in the $100s and $200s, the Bitcoin Investment Trust launched on Second Market, enabling high-net-worth investors to invest in bitcoin more easily and with less risk, through a credible fund. We can expect this kind of investment to keep increasing as more smart money flows in and bitcoin goes up in value over the next several months. Meanwhile, wealthy people in other countries, especially China, are also getting in, since they don't have as many investment opportunities there compared to Americans. This will sustain the momentum. There could be big corrections during this phase, but probably not any huge crashes anymore like what we saw in 2011 and early 2013 -- unless the government steps in and tries to over-regulate bitcoin or some major countries ban it. However, expect there to be at least some increase in government regulation as the big money players will want this because it would be bullish for their investment (i.e. making a safer environment for bitcoin to become part of the mainstream financial landscape). Some of the uber-libertarian types may take their profits and get out in this phase, as they discover that bitcoin is not going to be a way to overthrow the government, but instead that making money will take precedence over ideological motives for most people involved in bitcoin from this stage onward.
Timeline: This phase began in mid to late 2013 and will continue until the first bitcoin ETF is launched on the mainstream stock market, perhaps sometime before the end of 2014.

Phase 3. Ordinary Investors
Price range: $2,000 to $10,000.
Explanation: When the first bitcoin ETF is approved and available for trading on the New York Stock Exchange or Nasdaq -- most likely the Winklevoss Bitcoin Trust -- that will be like bitcoin's IPO. It will enable the average person to feel comfortable buying bitcoin in a way they are familiar with, i.e. through their mainstream online brokerage account, and they will be able to use their 401(k) funds to do so. This will open up a huge amount of new capital to flow into bitcoin, driving up the price by several more times in only one or two years. Bitcoin will be marketed to ordinary investors as "the new gold," a "digital gold" which is a better store of value than the traditional metal, and it will likely capture an ever-increasing market share of investors looking for an alternative to gold, for a few percent of their portfolio. It's quite likely that at some point in this phase we'll switch to using mBTC (millibitcoins) as the unit, because this will make it easier for people psychologically to invest smaller amounts of money and will set the stage for more user-friendly and widespread use of bitcoin in commerce.
Timeline: This phase probably starts sometime in 2014 and goes at least a couple of years.

Phase 4. Mass Adoption for Commerce
Price range: Something over $10,000. Who knows how much higher it goes, but eventually it will level off and grow more slowly.
Explanation: Once bitcoin has established itself as a totally mainstream investment and store of value, owned by hundreds of millions of people, and the price growth has slowed down to something less than a "hot tech stock" and more like a steady 10-20% increase per year, then people will start using bitcoin en masse for commercial transactions. Of course at this point the transactions will be in mBTC, since BTC would be extremely cumbersome by then for making normal purchases (people will prefer a unit that is closer to the value of a dollar or a euro, rather than dealing with amounts like 0.0001 to buy a book on Amazon or whatever). I suspect that mass use of bitcoin for commerce won't really materialize until the phases of rapid price gain have ended -- until then, bitcoin will be for hoarding, as a premier store-of-value asset. But eventually the point of saturation will be reached and people will feel like the era of massive gains are over and they'll feel more comfortable actually spending bitcoin.
Timeline: This phase will probably start anywhere from 2015 to 2018, depending on many factors -- and assuming that everything goes according to the outline above in the previous phases, without any major bumps in the road.

So, what do you think of this phase-by-phase prediction?

I like and agree with this a lot.  Maybe off by a few half orders of magnitude on certain phases, but pretty close to watch I'm expecting.  As long as bitcoin infrastructure makes it easier to be adopted by the masses, there is no reason that this won't ensue and the price skyrocket over 10k a coin.

[Numberless]

Hello all,

As I've been enjoying the recent rally, I've been trying to think about the big picture to keep from getting an itchy sell finger.

I think there are four phases of growth of bitcoin, from its creation to mass adoption. Here they are and the price ranges for each.

Phase 1. Libertarian Utopians and Techno-Geeks.
Price range: 0 to $250.
Explanation: These are the very early adopters, mostly comprised of two types of people (somewhat overlapping): idealistic folks who believe in the cryptocurrency movement as a way to reduce the power of government and the corrupt banking establishment, and software/web developers and others who are way ahead of the curve on studying and adopting revolutionary new technologies.
Timeline: This phase ended in the spring/summer of 2013.

Phase 2. Hedge Funds and Accredited Investors
Price range: $250 to $2,000.
Explanation: Starting in fall 2013, when bitcoin was in the $100s and $200s, the Bitcoin Investment Trust launched on Second Market, enabling high-net-worth investors to invest in bitcoin more easily and with less risk, through a credible fund. We can expect this kind of investment to keep increasing as more smart money flows in and bitcoin goes up in value over the next several months. Meanwhile, wealthy people in other countries, especially China, are also getting in, since they don't have as many investment opportunities there compared to Americans. This will sustain the momentum. There could be big corrections during this phase, but probably not any huge crashes anymore like what we saw in 2011 and early 2013 -- unless the government steps in and tries to over-regulate bitcoin or some major countries ban it. However, expect there to be at least some increase in government regulation as the big money players will want this because it would be bullish for their investment (i.e. making a safer environment for bitcoin to become part of the mainstream financial landscape). Some of the uber-libertarian types may take their profits and get out in this phase, as they discover that bitcoin is not going to be a way to overthrow the government, but instead that making money will take precedence over ideological motives for most people involved in bitcoin from this stage onward.
Timeline: This phase began in mid to late 2013 and will continue until the first bitcoin ETF is launched on the mainstream stock market, perhaps sometime before the end of 2014.

Phase 3. Ordinary Investors
Price range: $2,000 to $10,000.
Explanation: When the first bitcoin ETF is approved and available for trading on the New York Stock Exchange or Nasdaq -- most likely the Winklevoss Bitcoin Trust -- that will be like bitcoin's IPO. It will enable the average person to feel comfortable buying bitcoin in a way they are familiar with, i.e. through their mainstream online brokerage account, and they will be able to use their 401(k) funds to do so. This will open up a huge amount of new capital to flow into bitcoin, driving up the price by several more times in only one or two years. Bitcoin will be marketed to ordinary investors as "the new gold," a "digital gold" which is a better store of value than the traditional metal, and it will likely capture an ever-increasing market share of investors looking for an alternative to gold, for a few percent of their portfolio. It's quite likely that at some point in this phase we'll switch to using mBTC (millibitcoins) as the unit, because this will make it easier for people psychologically to invest smaller amounts of money and will set the stage for more user-friendly and widespread use of bitcoin in commerce.
Timeline: This phase probably starts sometime in 2014 and goes at least a couple of years.

Phase 4. Mass Adoption for Commerce
Price range: Something over $10,000. Who knows how much higher it goes, but eventually it will level off and grow more slowly.
Explanation: Once bitcoin has established itself as a totally mainstream investment and store of value, owned by hundreds of millions of people, and the price growth has slowed down to something less than a "hot tech stock" and more like a steady 10-20% increase per year, then people will start using bitcoin en masse for commercial transactions. Of course at this point the transactions will be in mBTC, since BTC would be extremely cumbersome by then for making normal purchases (people will prefer a unit that is closer to the value of a dollar or a euro, rather than dealing with amounts like 0.0001 to buy a book on Amazon or whatever). I suspect that mass use of bitcoin for commerce won't really materialize until the phases of rapid price gain have ended -- until then, bitcoin will be for hoarding, as a premier store-of-value asset. But eventually the point of saturation will be reached and people will feel like the era of massive gains are over and they'll feel more comfortable actually spending bitcoin.
Timeline: This phase will probably start anywhere from 2015 to 2018, depending on many factors -- and assuming that everything goes according to the outline above in the previous phases, without any major bumps in the road.

So, what do you think of this phase-by-phase prediction?

This captures my thoughts almost exactly; I just never got the chance to type it all out.  I'm sure the people currently pouring money into the exchanges right now expect a similar timeline to play out.  When I first bought in I always felt as though phase 2 was many years away instead of 500 or so days, and that phase 4 was at least a decade out.  Your timeline compresses the timeline that was originally in my head by half, which I'm liking a lot lol.  Anyways thanks for the post!

[MicroGuy]

The one major factor you seemed to have completely overlooked is the inevitable emergence of the altcoins.

Once people realize there's more than one make and model of automobile capital will begin flowing into the other automakers. Bitcoin POS hardware will be updated to accept multiple coins and consumer demand will catapult the most competitive altcoins into the stratosphere.

[BitCloud]

Pretty much nailed it. I think btc will become more of a store of value than a commerce player though... At least for the first couple years.

Amazing times.

[piramida]

Wish making dressed up as cogent analysis. Embarrassing and ridiculous.

oh look it's that sad troll that still waits for bitcoins to hit $1, again. yawn.

[freebird]

Hello all,

As I've been enjoying the recent rally, I've been trying to think about the big picture to keep from getting an itchy sell finger.

I think there are four phases of growth of bitcoin, from its creation to mass adoption. Here they are and the price ranges for each.

Phase 1. Libertarian Utopians and Techno-Geeks.
Price range: 0 to $250.
Explanation: These are the very early adopters, mostly comprised of two types of people (somewhat overlapping): idealistic folks who believe in the cryptocurrency movement as a way to reduce the power of government and the corrupt banking establishment, and software/web developers and others who are way ahead of the curve on studying and adopting revolutionary new technologies.
Timeline: This phase ended in the spring/summer of 2013.

Phase 2. Hedge Funds and Accredited Investors
Price range: $250 to $2,000.
Explanation: Starting in fall 2013, when bitcoin was in the $100s and $200s, the Bitcoin Investment Trust launched on Second Market, enabling high-net-worth investors to invest in bitcoin more easily and with less risk, through a credible fund. We can expect this kind of investment to keep increasing as more smart money flows in and bitcoin goes up in value over the next several months. Meanwhile, wealthy people in other countries, especially China, are also getting in, since they don't have as many investment opportunities there compared to Americans. This will sustain the momentum. There could be big corrections during this phase, but probably not any huge crashes anymore like what we saw in 2011 and early 2013 -- unless the government steps in and tries to over-regulate bitcoin or some major countries ban it. However, expect there to be at least some increase in government regulation as the big money players will want this because it would be bullish for their investment (i.e. making a safer environment for bitcoin to become part of the mainstream financial landscape). Some of the uber-libertarian types may take their profits and get out in this phase, as they discover that bitcoin is not going to be a way to overthrow the government, but instead that making money will take precedence over ideological motives for most people involved in bitcoin from this stage onward.
Timeline: This phase began in mid to late 2013 and will continue until the first bitcoin ETF is launched on the mainstream stock market, perhaps sometime before the end of 2014.

Phase 3. Ordinary Investors
Price range: $2,000 to $10,000.
Explanation: When the first bitcoin ETF is approved and available for trading on the New York Stock Exchange or Nasdaq -- most likely the Winklevoss Bitcoin Trust -- that will be like bitcoin's IPO. It will enable the average person to feel comfortable buying bitcoin in a way they are familiar with, i.e. through their mainstream online brokerage account, and they will be able to use their 401(k) funds to do so. This will open up a huge amount of new capital to flow into bitcoin, driving up the price by several more times in only one or two years. Bitcoin will be marketed to ordinary investors as "the new gold," a "digital gold" which is a better store of value than the traditional metal, and it will likely capture an ever-increasing market share of investors looking for an alternative to gold, for a few percent of their portfolio. It's quite likely that at some point in this phase we'll switch to using mBTC (millibitcoins) as the unit, because this will make it easier for people psychologically to invest smaller amounts of money and will set the stage for more user-friendly and widespread use of bitcoin in commerce.
Timeline: This phase probably starts sometime in 2014 and goes at least a couple of years.

Phase 4. Mass Adoption for Commerce
Price range: Something over $10,000. Who knows how much higher it goes, but eventually it will level off and grow more slowly.
Explanation: Once bitcoin has established itself as a totally mainstream investment and store of value, owned by hundreds of millions of people, and the price growth has slowed down to something less than a "hot tech stock" and more like a steady 10-20% increase per year, then people will start using bitcoin en masse for commercial transactions. Of course at this point the transactions will be in mBTC, since BTC would be extremely cumbersome by then for making normal purchases (people will prefer a unit that is closer to the value of a dollar or a euro, rather than dealing with amounts like 0.0001 to buy a book on Amazon or whatever). I suspect that mass use of bitcoin for commerce won't really materialize until the phases of rapid price gain have ended -- until then, bitcoin will be for hoarding, as a premier store-of-value asset. But eventually the point of saturation will be reached and people will feel like the era of massive gains are over and they'll feel more comfortable actually spending bitcoin.
Timeline: This phase will probably start anywhere from 2015 to 2018, depending on many factors -- and assuming that everything goes according to the outline above in the previous phases, without any major bumps in the road.

So, what do you think of this phase-by-phase prediction?

This captures my thoughts almost exactly; I just never got the chance to type it all out.  I'm sure the people currently pouring money into the exchanges right now expect a similar timeline to play out.  When I first bought in I always felt as though phase 2 was many years away instead of 500 or so days, and that phase 4 was at least a decade out.  Your timeline compresses the timeline that was originally in my head by half, which I'm liking a lot lol.  Anyways thanks for the post!

Glad you liked it! I wanted to write this up so that I can come back to it every once in a while when I get tempted to sell, to remind myself to keep seeing the big picture and realistic long-term potential.

I've found that if something is a really good investment, most of the price growth tends to come more quickly than most people expect. That's why I think 2013 through 2015 are likely to be the years when most of the profit potential of bitcoin as a high-ROI investment will be realized. I got in at an average price of about $120 in April and May, and I'm amazed at how much the price has already gone up since then, but when I look at the facts objectively, I realize that it actually makes perfect sense. When I bought, I had to take wads of cash to Wal-Mart to send MoneyGrams to BitInstant. How many ordinary people would be willing to do that? Very few. And that's why the price was low, since very few people were willing to take the crazy type of risks to actually buy some bitcoins. Now, only a few months later, people can buy bitcoin through a Silicon Valley VC-backed multimillion-dollar company (Coinbase) using bank transfers. And there are already hedge funds and trusts for groups of very wealthy people investing in bitcoin. No wonder the price has gone up 5x since I bought. Similarly, it should not come as a surprise when one year from now, the price has gone up another 5x, because by then, any hedge fund worth its salt will have at least a couple percent of its assets in bitcoin. Looking back, the rise will be breathtaking, and much faster than expected, and many people will sell too soon along the way, because they will erroneously conclude "it can't possibly be going up this fast, I'd better get out now!"

I think the one thing that could really slow down my timeline is if the ETF approval is delayed. But, at most, maybe that could add one or two more years in Phase 2 before we reach Phase 3 (assuming the government eventually approves some bitcoin ETF).

Of course, the thing that could derail the whole thing is if a major government, especially the U.S., decides to impose extremely crippling regulations on bitcoin. But I'm guessing that's unlikely, because enough rich and powerful people have already decided to buy in, so the government will not screw them over. In the U.S., the rich reign. If they want bitcoin to succeed, then they'll make sure it will, and they'll just buy off ("lobby") the politicians to make sure it doesn't get stopped. The train has left the station, and we're on it! 

[freebird]

Pretty much nailed it. I think btc will become more of a store of value than a commerce player though... At least for the first couple years.

Amazing times.

Indeed. Bitcoin is a contender for becoming the next high-powered Wall Street bubble, when it actually hits the stock market. Digital currency may be touted to the average investor as "the next big thing since the internet." One thing we know is that when the financial movers and shakers decide to inflate a bubble, it usually goes far beyond what most people predicted before the establishment decides to get on board. We are not even in bubble territory yet. The Average Joe still either hasn't heard of bitcoin or thinks its some "crazy libertarian thing." And the Average Joe can't even buy bitcoin yet with his Schwab account! And some people think the price right now is high? lol. Sure, there will be corrections, but I won't think we've really reached a high price until Joe Schmoe is logging into E-Trade and putting 5% of his stock portfolio into bitcoin because "my buddy told me he bought a few hundred bucks of this stuff back in '13 and bought his new Lexus with it."

[freebird]

The one major factor you seemed to have completely overlooked is the inevitable emergence of the altcoins.

Once people realize there's more than one make and model of automobile capital will begin flowing into the other automakers. Bitcoin POS hardware will be updated to accept multiple coins and consumer demand will catapult the most competitive altcoins into the stratosphere.

I'm sure some people will transfer some or all of their bitcoin capital into altcoins, as time goes on. Altcoins will be riskier and for people looking for potentially higher ROI. I suspect the digital currency space will only have room for 2 or 3 major coins at a time, and bitcoin, because of first-mover advantage, will probably stay as one of them for a long time. But yeah, eventually some better technology will overtake it, like with anything else. I've been starting to look into Mastercoin recently, and that one looks especially promising. But I think bitcoin has a long way up to go yet, even if a few altcoins end up doing better (while most others will do worse).