What does Bitcoin have in common with technological developments such as the iPhone, Google Glass, Facebook and Gmail. According to a report recently published by the New Scientist magazine, the incredible appreciation of Bitcoin can be explained by the attitudes exhibited by early adopters.
As incredible as it may sound, the controversial digital currency known as Bitcoin is expected to reach a currency exchange rate of $10,000 by 2020, and this amazing rise in value can be traced to the earnest enthusiasm shown by early adopters.
In 2014, researchers at the Massachusetts Institute of Technology conducted an interesting study that came to be known on campus as the Bitcoin Project. The first part of the project involved raising $500,000; with this cash, the researchers reached out to new MIT students and offered them $100 for the purpose of purchasing bitcoins. As expected the initial response was enthusiastic since more than 3,000 students signed up, thus giving the study a longitudinal aspect.
The MIT students received the $100 Bitcoin equivalent in two phases: early adopters received their electronic wallet two weeks earlier than the rest. What the researchers noticed with great interest was that the early adopters who cashed out of their Bitcoin holdings were extremely influential and caused their fellow participants in the study to do the same. Although all students had equal access to information about Bitcoin trends, news and exchange rates, they were more likely to be influenced by the early adopters they knew. In other words, when the early adopters cashed out, so did many of the late adopters.
Like other technological developments, the success of Bitcoin can be visualized by means of a chart showing a curve shaped like the letter “S.” At the beginning of the chart, the curve is not pronounced; once the early adopters become active, however, the curve skyrockets and becomes steeper before it levels off.
The MIT study may prove useful to digital currency traders who invest in rival cryptocurrencies such as Litecoin, Ethereum and Ripple.
Investors who wish to follow the S-curve effect will have to keep an eye on what the early adopters are saying and doing in relation to the various digital currencies. Naturally, bias would have to be consciously removed since early adopters may be seeking to influence the value of the digital currencies they hold; basically, they may try to inflate their holdings for an abrupt exit by means of cashing out.
Dil Bole Oberoi
