Anyone who has invested in bitcoin for a while is probably used to the constant “Up one minute” “down next minute” price trajectory. The price of cryptocurrency is at the moment struggling to sustain the momentum it has built in the previous weeks which saw price reach $9,000. Currently, it is hovering a little above $7,500 after defending a $7,400 price support.
Luno, a global cryptocurrency company with over 2.5 million customers in 40 countries including Nigeria, said in a new post on its website that bitcoin’s price movement could be a result of a distinct hype cycle.
A hype cycle refers to the process a new technology goes through before reaching mass adoption.
Luno identified five steps to a hype cycle which includes technology trigger, peak of inflated expectations, trough of disappointment, slope of enlightenment and plateau of productivity.
At the technology trigger level the innovation is at its developmental stage and attracts people’s attention. The technology could be expensive, bulky, difficult to use and confusing to understand. Just like bitcoin, every technological innovation had to go through this process. A most recent example is the foldable phone which despite the launch by smartphone manufacturers like Samsung and Huawei is still going through production processes. It would also be recalled that Samsung had to withdraw its foldable phone after some defects were identified in the phone.
The peak of inflated expectations is the stage where everyone including the media begins to talk about the innovation. It raises heated debates in media cycles and people begin to give success stories which may be exaggerated. Practically everyone has ideas for its future including scammers.
At the trough of disappointment level, people begin to realise the hype is not sustainable, hence they start losing interest. Those who criticised it are happy, but the technology gets better behind the scenes.
“The only difference is that people realise it was overhyped and become aware of the gap between reality and their expectations,” Luno noted.
On the slope of enlightenment, people’s disillusionment begins to give way to the awareness that the innovation still has relevance. The regulator also gets some form of grip and put some control to make it safer for everyone.
The plateau of productivity is when the technology becomes mainstream ditching the hype and earlier disappointment users experienced.
“The main lesson we take from the hype is that our perception of a technology doesn’t always reflect its actual quality and value,” Luno said.
The company believes bitcoin has gone past the first three stages; technology trigger (when it was launched in 2009 by a person or group known as Satoshi Nakamoto); peak of inflated expectations, (reached in 2016-2017 when prices exploded and everyone wanted to jump on the bandwagon) and trough of disillusionment (prices have dropped since their heights – a possible indication of public sentiment, reports of scams and companies making unrealistic promises have brought disappointment).
Bitcoin, the exchange says, might be on the slope of enlightenment given that it is gaining acceptance in various industries, including the mainstream financial industry. Bitcoin use cases are also on the rise with more stores willing to accept it as a means of payment. Importantly, the technology is improving and become far more usable – faster, cheaper and safer.
“But we believe that we are moving towards the point where widespread adoption of cryptocurrency is possible. We believe that the plateau of productivity will involve a frictionless financial system that is equal for everyone,” it said.
