Raoul Pal, former manager of the Goldman Sachs fund update an important chart comparing the adoption of cryptography to that of the Internet. Shared via his Twitter account, the graph attempts to represent the rate at which technologies have reached a set number of users over the same period.
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The chart for internet starts in 1992, while crypto starts in 2016 when Bitcoin and Ethereum were live. Both technologies had 5 million users at that time.
As seen below, the chart indicates that it took only 6 years for the crypto to increase its adoption levels and attract 295 million participants. During the same period, the Internet recorded only less than half of this growth which amounted to 119 million in 1998.
Pal claimed that crypto has grown by 137% during this period, while the internet has grown by 76%. 2021 was a major turning point for the adoption of digital assets, likely spurred by the COVID-19 pandemic, increased demand for digital payments, and unconventional forms of investment. Pal said:
2021 has been a year of accelerated growth and the effect of Reed’s law of networks building on networks creating even more exponential is clear (…). As I always say, this is the fastest technology adoption the world has ever seen…
Additionally, Pal predicts 1.2 billion digital asset users by December 2025 if the industry follows slowing internet growth. The metric could reach 2.5 billion users if “we assume the growth rate of the internet over the first 6 years”, he added.
The prediction becomes more optimistic year by year. The former Goldman Sachs executive said:
Using the 76% growth rate (suggesting an almost halving of network growth as the network matures), we now arrive at 5 billion users by 2030. That is, say it becomes THE primary source for possessing, transferring and recording value and contact conditions on a global scale. wow!
What’s Behind Crypto Adoption
An “explosion” of use cases and better applications are being driven by blockchain technology. These are the two main factors that Pal says have contributed to users jumping into this space.
In a digital world, everything tends to zero in cost driven by Moore’s Law and other phenomena.
But blockchain changed all that. He created a verifiable and immutable digital scarcity enabling an explosion of use cases in layer 1, layer 2 and application layer
— Raoul Pal (@RaoulGMI) March 12, 2022
The former Goldman Sachs executive and founder of Global Macro Investor (GMI) has proposed a formula to predict the impact of increased adoption on the price of digital assets. By multiplying daily trading volumes by the number of active users, an estimate of future price performance can be obtained.
Pal used the Bitcoin chart as an example. As seen below, in blue there is the price of BTC from 2010 until now versus its potential value applying this formula.
Charts for Ethereum, Polkadot, and XRP appear to match the proposed pattern. In the coming years, as the adoption of digital assets grows, Pal predicted that those tokens with a burning mechanism (ETH, BNB, LUNA, for example) could outperform the market.
Likewise, ETH could become more important than BTC and become a bigger asset in terms of market capitalization. As Pal said, this event could be inconsequential given the different characteristics of the two networks. He added:
But, if a network continues to create network effects, the log regression channel is still a great way to predict the future… Assuming BTC remains 1 standard deviation below the trend, this gives a price target of $600,000.
Related Reading | Comparing Bitcoin and Crypto to the Internet in 1997
At the time of writing, the price of BTC is trading at $39,035 with sideways movement over the past few days.