Former Goldman Sachs fund manager Raoul Pal updated an important chart comparing crypto adoption to that of the Internet. Shared via his Twitter account, the chart attempts to represent the pace at which the reached a determined number of users over the same time.
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The chart for the internet starts in 1992, while crypto starts in 2016 when both Bitcoin and Ethereum were live. Both technologies had 5 million users during those times.
As seen below, the chart indicates it took crypto only 6 years to increase its levels of adoption to attract 295 million participants. Over the same period, the internet only saw less than half of that growth which stood at 119 million by 1998.
Pal claimed crypto has experienced a 137% growth in that period, while the internet saw 76%. 2021 was a major turning point for digital asset adoption, probably boosted by the COVID-19 pandemic, the increased demand for digital payments, and unconventional forms of investment. Pal said:
2021 was an accelerating growth year and the Reed’s Law effect of networks built upon networks creating even more exponentiality is clear (…). As I always say, this is the fastest adoption of technology the world has ever seen…
Furthermore, Pal projected 1.2 billion digital assets users by December 2025 if the sector follows the internet’s growth slowdown. The metric could rise to 2.5 billion users if “we assume the first 6 years rate of growth of the internet”, he added.
The prediction gets more optimism with each year. The former Goldman Sachs executive said:
Using the 76% growth rate (suggesting a near halving of network growth as network matures), we now get to 5bn users by 2030. ie it becomes THE dominant source of owning, transferring and recording value and contactual terms global. Wow!
What’s Behind Crypto Adoption
An “explosion” in use cases and better applications are driven by blockchain technology. These are the main two factors that, according to Pal, have contributed to users jumping into this space.
In a digital world, everything trends towards zero in cost driven by Moore Law and other phenomena.
But blockchain changed all of that. It created verifiable and immutable digital scarcity allowing an explosion of use cases in the Layer 1, Layer 2 and applications layer
— Raoul Pal (@RaoulGMI) March 12, 2022
The former Goldman Sachs executive and founder at Global Macro Investor (GMI), proposed a formula to predict the impact of increased adoption on the price of digital assets. By multiplying the daily transaction volumes by the number of active users, it’s possible to get an estimate of future price performance.
Pal used the Bitcoin chart as an example. As seen below, in blue, there is the price of BTC since 2010 until now versus its potential value applying this formula.
The charts for Ethereum, Polkadot, and XRP, seem to fit the proposed model. In the coming years, as the digital asset adoption expands further, Pal predicted those token with burning mechanism (ETH, BNB, LUNA, for example) could outperform the market.
Similarly, ETH could grow larger than BTC and become a bigger asset in terms of market cap. As Pal said, this event could be of no consequence given both networks’ different characteristics. He added:
But, if a network continues to create network effects then the log regression channel is still an excellent way of forecasting the future… Assuming BTC remains 1 standard deviation below trend it gives a price target of $600,000.
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At the time of writing, BTC’s price trades at $39,035 with sideways movement in the past days.