In 1962, sociologist Everett Rogers published the well-known book Diffusion of Innovations in which he classified consumers into the following five groups: innovators, early adopters, early majority, late majority, and laggards.
Adoption curve. Source: Business-to-you
Since its creation, the above table has been widely used in many industries, although new technologies have better synthesized such research. The graph perfectly describes how the psychological profile of each group is reflected in consumer habits and how they approach innovative products and services. One of the most important areas to consider is the clear breaking point known as the abyss.
Consumer preferences vary widely
This gap between the first users and the early majority exists because consumers prefer to listen to and copy references from their group. This jump represents the transition to a conventional market and has many similarities to the current life cycle of cryptocurrencies.
Therefore, crossing the chasm is of utmost importance for any product or service willing to serve a more pragmatic customer base.
Geoffrey A. Moore’s book, Crossing the Chasm, states that to overcome the gap, the product must offer a complete solution, provide a high level of service to appeal to pragmatists, and establish a strong reputation by word of mouth.
The growth of smartphones is a great example
Global smartphone sales (millions). Source: Statista
Despite the fact that smartphones are a household name now, their growth in the first two years of this industry averaged a mere 20% annually. Over the next five years, a 50% growth rate indicated that the technology had moved a much larger group of users.
Apple’s iPhone launched in June 2007, selling more than 300,000 units in the first weekend, while the iPhone 3G arrived a year later and set a record 1 million units sold in its first weekend.
In such a scenario, one would expect a stable and healthy price chart for Apple (AAPL) during that period, but that was not what happened.
Apple Price (AAPL). Source: TradingView
As shown above, there was a 63% rebound during the second half of 2007, but even that period faced a 22% price drop in just five days. The beginning of 2008 also marked a difficult time for shareholders as AAPL fell to $ 18 from $ 28 in less than a month.
During this period, Apple’s shares underperformed the S&P 500 by 29.5% in the first quarter of 2008.
The penetration of smart phones in the United States in the mobile phone market. Source: ComScore
ComScore data shows that in 2008 smartphone penetration in the United States was struggling to reach the 10% mark. Consumers were unquestionably in the ‘early adopter’ phase, so investors had reason to doubt optimistic expectations, even if they came from reputable investment firms.
Bitcoin 2020 versus Apple 2008
Comparison of S&P 500 (2008) with BTC-USD (2020). Source: Cointelegraph
As shown in the chart above, recent surveys show that 11% of Americans own Bitcoin, which is on par with smartphone penetration in December 2008. Similar trends can be found in price volatility and the correlation between Bitcoin and the S&P 500.
Apple (AAPL) and S&P 500 90-day correlation. Source: TradingView
Bitcoin and S&P 500 90-day correlation. Source: TradingView
Although Bitcoin can be considered an innovative technology with indisputable advantages over traditional financial instruments and gold itself, it has yet to demonstrate its trillion dollar potential. Changing human patterns and, more importantly, beliefs is a Herculean task.
The definition of money has been deeply engraved in society by fiduciary systems that depend on intermediaries. Furthermore, “money” is often subject to erratic control by governments and central banks. Bitcoin can undergo a kind of metamorphosis to reach an early majority of pragmatists.
The June 2010 launch of the iPhone 4 finally created the spark for these pragmatists. Was it the 5 megapixel camera with 720p resolution? Could it have been the launch of FaceTime? Maybe it was the App Store hitting 5 billion downloads or the reduced two-year contract of $ 99 for the old 3GS model?
It is possible that it is a combination of each of these product offerings and milestones, which allowed Apple to avoid the abyss.
Looking forward
It is an unsuccessful exercise to imagine what it will take to change an entire niche of participants who already know the benefits of Bitcoin but have so far remained still.
Minor adoption catalysts have already been implemented for traders and investors. For example, BitPay and Coinbase Commerce, but there is still a lot of room for improvement.
Apple investors who fled in 2008 due to volatility in share prices, 20% declines in value, or looming conventional adoption uncertainties are probably pretty pitiful now. This is because AAPL shares soared 520% over the next three years to hit $ 78 in early 2012.
A similar growth result for Bitcoin would raise its price to $ 59,900, which equates to a $ 1.1 trillion market cap in 2023. Of course, to many, that sounds incredibly irrational.
A possible trillion dollar valuation for Bitcoin represents just 10% of the total market capitalization of $ 11 trillion gold. Although it seems an impossible figure, it is only 3% of the current global supply of banknotes, coins and current deposits.
The views and opinions expressed here are solely those of the author and do not necessarily reflect Cointelegraph’s views. Every investment and commercial movement involves risk. You must do your own research when making a decision.
