On the applicability of S-Curves to Bitcoin

Certainly the matter of Bitcoin’s penetration of the overall population is critical to understand where price is going. According to money.disrupted’s survey of the global population (available here), the current penetration of Bitcoin ownership is ~4% of adults globally, with much of this number of owners having joined the ranks over the past 18 months. If penetration was to continue to follow the path of a common S-Curve, it would look something like this (adoption curves published in the Wall Street Journal):

With much room left for growth until full potential. Of course the next questions are: How much penetration is Bitcoin likely to actually reach? And: How long will it take to get there? While these discussions can be helpful we wanted to highlight a few important issues with this approach, and why the curve might look a little different for Bitcoin.

Survivor bias

There are plenty of innovations and products that never made it up the S-Curve. This happened when either:

  • (1) the technology didn’t gain adoption at all. There are many examples but the blimp is probably our all time favorite.
  • (2) the technology stayed, but the specific solutions and products died off and were replaced to meet the underlying need (think BetaMax vs. VHR, Blackberry vs. iPhone).

For Bitcoin this means that we need to understand both the adoption curve for peer-to-peer issued assets and then if Bitcoin is likely to maintain its current leadership or die-off to be replaced by other assets (both metrics are a focus money.disrupted’s research on digital assets).

Price declines and increasing utility usually contribute to adoption curves

The adoption curve is usually interpreted as the population progressively becoming aware and progressively deciding to take advantage of the new technology. For simplification we often talk of early adopters, early majority, late majority and then laggards. However, the underlying dynamic is more complex than simple awareness: the price and utility of products play a significant role. All the S-Curves highlighted above are characterized by pronounced price declines and increasing utility over time. For most innovations, being a late adopter confers a premium:

  • Dramatically lower price
  • Dramatically improved user experience
  • In many cases, higher product utility (for all networks innovations: value is higher at the time of late adoption as networks have many more participants).

For Bitcoin, little of this seems to be happening for now. It is not to say it won’t: better wallets and integration will simplify the user experience and greater adoption will naturally increase the utility of possessing Bitcoin.

However from a price perspective, Bitcoin diverges from many of the technologies highlighted above in the sense that getting in later is not better. We can look at price in different ways: to simplify, for a payments use case price is the transaction fee, for a “digital gold” use case (store of value, alternative asset) price is the price of Bitcoin:

  • Bitcoin is going up in price as users jump in, creating a disincentive for further adopters.
  • Transaction fees have also gone up in price with adoption. This issue is probably less dramatic in since fees have stabilized again at lower levels (less than $1 per transaction) and because there are potential scaling solutions to remediate this (state channels solutions like Lightening).


This is not to say Bitcoin won’t see much higher levels of adoption in the coming years, but the main implications are:

  • The adoption curve might ultimately get there but feature an odd shape of waves and plateaus rather that a clean S-Curve. In our report on Bitcoin (here), we detail the adoption curve over the past 3 years and we can see we’re currently in a slower growth path than a year ago. On a traditional S-Curve this would mean we’re converging to max penetration. We don’t believe that to be true, but we see this as proof the Bitcoin adoption curve is unlikely to look like a S-Curve overall.
  • In the medium to long term, Bitcoin is exposed to alternative solutions that fare better in terms of increasing value for later adopters. E.g. a more stable cryptocurrency (either a “stable coin” or a government-issued currency) might take share as we go up the adoption curve. The likelihood of this happening the short to medium term is low, but Bitcoin long term investors need to keep monitoring competition.
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