Former Goldman Sachs fund manager Raoul Pal has updated an important K-line chart comparing the adoption of cryptocurrencies to the adoption of the Internet. The K-line chart, shared via his Twitter account, attempts to represent the speed at which these technologies reach a certain number of users at the same time.
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Internet K-line charts began in 1992, while cryptocurrencies began in 2016, when both Bitcoin and Ether existed. During this time, both technologies had 5 million users.
As shown in the chart below, this K-line chart shows that it took only 6 years for cryptocurrencies to increase their adoption levels, thus attracting 295 million participants. During the same period, the Internet saw less than half the growth of 119 million in 1998.
Pal claims cryptocurrencies grew 137% during this period, while the internet grew 76%. 2021 is a major turning point for digital asset adoption, likely driven by the COVID-19 pandemic, increased demand for digital payments, and unconventional forms of investment. Parr said.
2021 is a year of accelerated growth, with the Reed’s Law effect of building on top of the web creating more exponential (……). As I often say, this is the fastest technology adoption in the world ……
Source: Raoul Pal via Twitter
In addition, if the industry follows the Internet growth slowdown, Pal expects to have 1.2 billion digital asset users by December 2025. He added that if "we assume the growth rate of the Internet for the first six years," that metric could increase to 2.5 billion users.
The forecast gets more optimistic every year. The former Goldman Sachs executive said.
Using a 76% growth rate (which suggests that network growth almost halves as the network matures), we are now on track to reach 5 billion users by 2030. That is, it becomes the primary source for owning, transferring and recording value and contact terms globally. Wow.
What's behind the adoption of cryptocurrencies
Blockchain technology is driving an "explosion" of use cases and better applications. According to Pal, these are the two main factors driving users into this space.
In the digital world, driven by Moore’s Law and other phenomena, everything tends toward zero cost.But blockchain has changed all that. It creates verifiable and immutable digital scarcity, which leads to a dramatic rise in use cases at the Layer 1, Layer 2, and application layers
The former Goldman Sachs executive and Global Macro Investor (GMI) founder came up with a formula to predict the impact of increased adoption on digital asset prices. By multiplying the daily trading volume by the number of active users, future price performance can be estimated.
Pal uses the Bitcoin K-line chart as an example. As shown in the chart below, the blue part is the BTC price since 2010 to date and its potential value applying this formula.
Source: Raoul Pal via Twitter
The K-line charts for Ether, Polkadot and XRP appear to fit the proposed model. Over the next few years, as digital asset adoption expands further, Pal predicts that those tokens with destruction mechanisms (e.g. ETH, BNB, LUNA) could outperform the market.
Again, in terms of market cap, ETH may become larger than BTC and become a bigger asset. As Parr says, this event may have no impact given the different characteristics of the two networks. He adds.
However, if the network continues to produce network effects, then the logistic regression channel is still an excellent way to predict the future …… assuming that BTC remains 1 standard deviation below trend, which gives a price target of $600,000.
Related Reading | Comparing Bitcoin and Cryptocurrencies to the Internet in 1997
At the time of writing, the price of BTC has been trading sideways for the past few days, trading at $39,035.
BTC is trending lower on the 4-hour chart. Source: BTCUSD Tradingview