Luno, the global cryptocurrency exchange with over 2.9 million customers in over 40 countries, has seen an 60% quarter-to-quarter increase in new customers despite ongoing Bitcoin price volatility. In the past week, the price of Bitcoin dropped to around R173 000 after highs of R188 000 in the past month.
Marius Reitz, Luno’s General Manager for Africa considers where cryptocurrency is in the hype cycle – the process a new technology goes through before reaching mass adoption.
The Gartner Hype Cycle
Where cryptocurrency is in the cycle will differ with each commentator. The hype cycle is not scientific nor is it meant to be predictive, but it does provide a useful guideline. Initially there is heightened optimism, a phase we call the peak of inflated expectations. Luno believes that the technology trigger was the launch of Bitcoin in 2009 and that the peak of inflated expectations was in 2016 –2017. At this time, prices exploded and everyone was keen to jump onto the bandwagon.
The main lesson we’ve taken from the hype is that our perception of new technology doesn’t always reflect its actual quality and value. As the technology matures and the infrastructure improves, the use cases for cryptocurrency will become clearer.
Certain commentators believe that Bitcoin is now in the trough of disillusionment. The signs are that the price volatility may be an indication of public sentiment, there are many reports of scams which put serious investors off cryptocurrency and there are many cryptocurrency companies and ICOs which have made unrealistic promises.
Others believe that cryptocurrency may be going through the slope of enlightenment, as cryptocurrency is gaining acceptance in various industries, including the mainstream financial industry. In the next few months, Bakkt plans to enter the cryptocurrency market with an open platform for cryptocurrency services, including trading. Bakkt is owned by ICE, the company that owns the New York Stock Exchange.
Increasingly, traditional financial services companies such as US-based Fidelity are rolling out institutional Bitcoin trading services. Numerous businesses are researching how it could improve their businesses. The technology is improving and becoming far more usable — faster, cheaper and safer. People are starting to use Bitcoin to solve problems, such as those linked to credit card fraud in the airline industry. The price is now linked to the value of the technology, not just hype.
Luno believes that we’re getting closer to the point where widespread adoption of cryptocurrency is possible, particularly in light of Facebook’s announcement of the launch of Libra on its platforms.
One of the main barriers so far has been the difficulty of finding a trustworthy exchange and wallet provider. Another is finding comprehensive, accurate information about Bitcoin that anyone can understand without needing to know the finer details of the technology.
Luno is filling these gaps and providing the reliable, secure infrastructure necessary for Bitcoin to climb the slope of enlightenment. We believe that the plateau of productivity will involve a frictionless financial system that’s open and equal for everyone.
What is a hype cycle?
Gartner published its hype cycle as a way to track the process leading to mass adoption of emerging technologies.
The cycle begins with a technology trigger, followed a peak of inflated expectations as adopters over-emphasise the new technology’s benefits. Because hype is unsustainable, step three is the inevitable trough of disillusionment. This is followed by the slope of enlightenment, during which some uses are identified for the technology, marking the beginning of widespread adoption.
The plateau of productivity describes the stage in the process where we become accustomed to the technology and it loses its initial shine as we move quickly into accepting its benefits as the norm.