Bitcoin Monetization: Gartner Hype Cycles

[butka]

I've come across an interesting medium post by Vijay Boyapati I'd like to share.

The post touches upon many aspects of Bitcoin, but what I think is especially interesting is the question of Bitcoin monetization and Gartner hype cycles.

The entire article is great, but in the following I will present some points related to the section called The shape of monetization.

What is a Gartner hype cycle?

Gartner hype cycle is an S-curve that represents the typical phases of adoption of any new technology.


Source: Ref. [1]

1^st phase: Burst of enthusiasm of early adopters. Price rises to ATH when speculators also enter the picture. Eventually, the supply of newcomers and speculators is exhausted which leads to a fall.

2^nd phase: After the initial enthusiasm, there is a rapid drop and the price reaches a minimum.

3^rd phase: A period of slow growth after public derision and prolonged disillusionment in the possibilities of the new technology.

4^th phase: Price consolidates to a plateau of productivity. During the fourth stage, people in charge of the technology continue to work and improve away from the media spotlight.

After these 4 phases, the previous hype cycle is over. Again, new people start to join, and the base of adopters grows steadily. New hype cycle is initiated with higher public base and new adopters.

Example of Gartner hype cycle

The author gives an example of this cycle by quoting the price of Gold, from the 1970s to 2000s. This is a typical example of the process of monetization driven by social dynamics.


Source: Ref. [1]

The Four Hype Cycles of Bitcoin (and the Fifth to Come)

According to the author, Bitcoin has already gone through 4 Gartner hype cycles.

1. 0-1 USD: This cycle was driven by cypherpunks and tech savvy people
2. 1-30 USD: This cycle was driven by enthusiast and early entrepreneurs
3. 250-1100 USD: This hype cycle was driven by early retail investors and some institutional investors
4. 1100-19600 USD??: This is the ongoing phase driven by early majority of investors
5. ??: The author expects another major Gartner cycle still to come. This one will be driven by national states that would accept Bitcoin as currency reserve.

Some additional interesting lines from the article:

• The duration of the current (forth) cycle cannot be predicted, the plateau may be reached at bitcoin price of $50,000.
• If bitcoin were to have equal market capitalization as gold, it would be worth $380,000.
• When bitcoin reaches the market capitalization of gold, it will have the same volatility as gold. Several times beyond the marketcap of gold, the volatility of bitcoin will be so small that it will become a medium of exchange in addition to a store of value (which is now).
• In each hype cycle, the volatility is lower in the plateau phase, while it is higher in the peak and crash phase.
• Each successive hype cycle brings lower volatility.
• The fifth upcoming Gartner hype cycle would bring the national states which would accumulate bitcoin as foreign currency reserve. One trillion dollars marketcap is needed before the nation states can start to look at bitcoin as a foreign reserve currency.

What do you think? I have no background in economy to be able to tell if some of these points have any merit, but the case presented looks very strong to me.

The most speculative seems to be the fifth hype cycle where national states start to acquire BTC. Does this make sense to you?

In conclusion, check out the entire article. There are many more Bitcoin related aspects discussed in it.

Ref [1]: https://medium.com/@vijayboyapati/the-bullish-case-for-bitcoin-6ecc8bdecc1

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[davis196]

This is a pretty insteresting theory and charts.
I believe that bitcoin is on the "plateau of productivity" and big price increases are highly unlikely to happen in the next few years.However,I don't believe that national states will accept bitcoin as a reserve currency.
Comparing bitcoin prices with gold prices is a mistake as well. 

[1Referee]

I believe that bitcoin is on the "plateau of productivity" and big price increases are highly unlikely to happen in the next few years.

Bitcoin isn't exactly far away from where it started around 9 years ago. I haven't seen much that actually justifies any optimism towards further growth development on levels other than speculation. Back in the days Bitcoin was a currency, it turned into a speculative game, and now we are out to regain that what we "lost" years ago to boost utility value.

As far as price increases go, I think they will remain part of this market. People shouldn't forget that the more people own Bitcoin, the less there is available to buy on spot exchanges, and thus the more likely it is for extreme price movements to follow us even when we're heading towards $100,000 levels.

Comparing bitcoin prices with gold prices is a mistake as well. 

Is that so? Bitcoin is pretty much everything people credit Gold for, but it has never really fulfilled its promise. Bitcoin is here to change that.

[butka]

This is a pretty insteresting theory and charts.
I believe that bitcoin is on the "plateau of productivity" and big price increases are highly unlikely to happen in the next few years.

Thanks. I also think we are currently on the plateau of productivity. I checked just a couple of days ago and was pleasantly surprised to learn how far the developers had advanced in developing the lightning network. Once the LN goes live (probably at the end of next year), we might witness a new wave of enthusiasm and wider adoption of bitcoin.

Back in the days Bitcoin was a currency, it turned into a speculative game, and now we are out to regain that what we "lost" years ago to boost utility value.

I think we will come to the point when bitcoin will be used as a currency increasingly more. Bitcoin first had to become a store-of-value, because there is no currency without first being a store-of-value. Now that bitcoin has proven itself to be a store of value (somewhere I heard that currently, on average, Bitcoin has more daily transactions than Gold), it's time to be a medium of exchange. I believe the LN will be a game changer in this respect.