In the following article, I’m going to share some of the stages of a market and its parallels in cryptocurrency and blockchain innovation from the innovators, the the gradual interest population, to the investors and entrepreneurs.
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Emerging Industries Have Commonalities
Most new industries are similar to new families. According to Tolstoy, “happy families are all alike; every unhappy family is unhappy in its own way.” The fact of the matter is that all new industries are usually inherently unstable for a variety of reasons.
Let’s take a look at a few of these reasons.
The first is that barriers to new players are relatively low.
Entrepreneurs in emerging industries gain wind of potential opportunities and participate in a specific process similar to the one outlined below.
The barrier is simply to design and somewhat esoterically and logically present a newfangled contraption. Then entrepreneurs must attract resources (investors will invariably throw money at new innovations).
Most of this investment money will disappear, it will be a cash transfer from savers to grifters and scammers, some of this money will go to builders. One crucial aspect to remember is that there will be fierce competition in this stage, as investors back several entrepreneurs and try to capture customer dollars that are barely there.
Industries in the past required substantial investment in physical machinery, supplies and materials, in addition to labor. Current hot industries such as software, blockchain, and crypto require investment to conduct regulatory capture, funds for knowledge workers, and capital to establish entrenchment via marketing, and improvements in product research and development.
Early investors who bet on the right horse for the long-term (very hard in the early days) can gain significant returns. Those who buy into companies during the frenzies in these cycles may gain upside but it is hard to time the market and get out at the right time.
Don’t believe me?
See the cryptocurrency boom and bust in the periods before second quarter 2018.
The Blockchain and Cryptocurrency Industry are Prime Examples
The First Stage – Pioneers and Progress
The industry forms with the bitcoin whitepaper. Early enthusiasts push it forward by contributing to the code, helping to give bitcoin value by trading items and goods for bitcoin and by creating exchanges. Additional platforms see the value and integrate bitcoin to have a seamless system. Platforms such as the Silk Road see the value of a pseudonymous currency to conduct transactions and take the value of bitcoin higher.
The Second Stage – Gradual Interest
Entrepreneurs enter and build more applications around the the innovation. In the bitcoin and digital assets sector, we see Satoshi Dice and other applications as examples of entrepreneurs stepping in and building. Others start to see opportunities in the sector and few more coins appear before 2017. Bitcoin would stick around while other coins would come and go. Then, enter Ethereum with its novel ways to raise funds, develop projects, and unlock value.
We still saw a gradual build up over the years that was organically built and bootstrapped.
Remember that investing in Bitcoin and Ether was still a risk in the early days but it was much less so due to costs. If you saw potential in the technology and currency, acquired some of these digital assets and kept it safe, you would have seen substantial returns.
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