Given the rapid growth we’ve seen in both the stock and cryptocurrency markets over the last three months, IFTF shares an article that helps investors under the rise in this exciting investment sector.
The Cryptic Rise of Cryptocurrency
On August 4th of this year, we put out a mini newsletter to our private Facebook group to consider taking a chance investing in one or both of the popular cryptocurrencies Bitcoin (BTC) and Ethereum (ETH), via the smartphone app Coinbase. At the time, Bitcoin was trading at $2,846 a coin, and Ethereum was trading at $220 a coin. Since then, the two coins have enjoyed massive increases, and at the time of this post, sits at about $14,800 for BTC and $480 for ETH. Congrats to all of you who were brave enough to take such a chance. These numbers are staggering, but let’s take a look behind the scenes to understand the math, using the concept of an S-Curve.
What’s an S-Curve?
According to the business dictionary, an S-Curve is:
A type of curve that shows the growth of a product in terms of another variable, often expressed as units of time.
For example, an S-curve of the growth of company for a new product would show a rapid, exponential increase in sales for a period of time, followed by a tapering or leveling off. The tapering occurs when the population of new customers declines. At this point, growth is slow or negligible, and is sustained by existing customers who continue to buy the product. See the S-curve chart at right.
Now, here’s the easiest stock market example of the S-Curve that you may recall in the last 10 years. It’s Apple’s (AAPL) iPhone.
When the Apple iPhone first debuted in June of 2007, it started in what business folks would deem the contact/awareness phase. It was marketed as a revolutionary product, but it had little following. Tech-savvy folks were aware of it, but the average cell phone user was not aware or a fan of iPhone due to a host of reasons – the cost ($500), limited carriers (only AT&T), and the general hesitance that comes with trying something different from the norm.
For almost 3 years, the Apple iPhone flirted in the understanding/trial use phase of the S-Curve. The iPhone maker would soon negotiate a subsidized phone with AT&T where customers would pay $200 down, instead of $500 on a purchase, and eventually, folks who were interested but couldn’t wait defected from their phone carriers and joined AT&T to get the iPhone.
Starting in 2011, iPhone left the trial use phase and entered the mainstream adoption and institutionalization phase, as its availability broadened to Verizon and other carriers both nationally and internationally. From there, massive amounts of consumers began purchasing the iPhone, as it was readily accessible, available, popular and accepted as the most trendy smartphone. Businesses began providing them to employees, and today the products are as common as finding a penny on the ground. It’s safe to say the iPhone stands squarely in the product necessity phase today.
Below is a chart of iPhone sales over the years. Can you see the S-Curve in sales?
The easiest way to remember this:
- First, S curves start with a modest and shallow growth. (Awareness, Understanding, Trial Use)
- Then, the growth accelerates rapidly, and the slope arches upwards until it reaches maximum growth. This point of maximum growth is the point of inflexion. (Adoption and Institutionalization).
- After the point of inflexion, the growth tapers down to its mature where there is little to no growth. This mature stage of the S curve can be called (Internalization).
Studying the S-Curve, we see how the iPhone survived the consumer market to become an everyday product, and how businesses (in general) succeed or fail, depending on their ability to keep climbing up that curve. We hope this is a bit clearer to you.
How S-Curves Connect to Cryptocurrency
In August, IFTF told folks to take a ride on the wild side and take a chance with investing in Bitcoin and Ethereum. It was called a chance because nothing is guaranteed. For those who did, it’s paid off well.