In a series of tweets, growth manager for the Kraken crypto exchange, Dan Held, explored the relationship between Bitcoin price and its adoption. Held believes that cryptocurrency has seen two major turning points in this regard, in 2013 and 2017.
At that time, the price of Bitcoin had significant price spikes and, according to Held, that was when the majority of current users joined the network. It’s part of a “viral marketing loop” or mechanism that drives mass adoption of a product by the influx of constantly recruited users.
For the general public and users who are not yet familiar with Bitcoin, the increase in its price signals “success” – that is, it has successfully solved a problem and is successful in persuading them to do so. ’embrace cryptocurrency. In this sense, Held said that BTC would not have the current number of users if its price “had stayed at $ 100.”
Bitcoin is designed for mass adoption
To demonstrate that the above is part of the design of Bitcoin, Held cited Bitcoin inventor Satoshi Nakamoto, who had this to say about the network effect of cryptocurrency.
Next, Held showed how the reduction in supply issuance for Bitcoin is a catalyst for bull markets. As the chart below shows, when Bitcoin’s inflation rate decreases with the halving, the price of Bitcoin increases.
Also, unlike other commodities, Bitcoin has a constraint on the production of its supply which prevents miners from increasing it and bringing more BTC to the market in response to increased demand.
In recent months, the number of Bitcoin users has seen a significant increase. Kraken’s growth manager shared the image below showing the number of users on Coinbase to view the price / adoption ratio.
Other metrics show similar results: funding for new Bitcoin-related businesses and services has increased; the volume of transactions shows an increase in liquidity which attracts more traders; Bitcoin Core developers have had increased activity due to corporate sponsorship; the hash rate has grown as the network has the incentives for more miners to keep increasing it.
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