The Gartner Hype Cycle is a model that explains the reception of new technologies in our society. The market researcher Jackie Fenn invented this model working for the market research company Gartner. Hence the name Gartner Hype Cycle. The Y-Axis of the curve that you can see describes the attention that a technology receives, the X-Axis the time that has passed since the invention of a new technology.
It fits to the invention of Bitcoin or cryptocurrencies in general as well. Though, we likely have to modify the cycle to describe the crypto markets. In a simple version of the model the cycle we can describe it in five parts. The first phase is called:
The exact date of the creation of Bitcoin is not exactly clear. Satoshi Nakamoto published the whitepaper of Bitcoin in October 2008 and it is possible that he had already created Bitcoin by then. Though, the first message on the blockchain of Bitcoin dates famously back to the 3rd January 2009. Basically, all the inventions for Bitcoin made its invention possible in the nineties already. But as the first message reveals Bitcoin was created out of an economic-political desire. But that is another subject.
According to Fenn, only experts and professionals will adopt the technology during this phase. Besides, Cypherpunks and code-geeks this also included libertarians and anarcho-capitalists who dominate the crypto space until today. From these insiders information ripples to less informed people. Which leads to the next phase.
Peak of Inflated Expectations
From the insider circle information seeps slowly into the mainstream. And slowly or rapidly creates a hype. Bitcoin was for a long time only known in a special audience. Cypherpunks, libertarians and related people heard about Bitcoin first and only when the price of Bitcoin rallied did it attract people with other backgrounds. Those people have very different backgrounds professionally, politically etc. but they share an affinity for financial matters and drove the price of Bitcoin higher.
Typical for this stage of the hype cycle is that people exaggerate the possibilities of the technology. We saw this behavior during the ICO craze of 2017/18. Every little cryptocurrency project wanted to disrupt its branch. However, we all know how it ended. Over 90% of ICO projects already failed. Of these ICOs one half turned out to be scams, another half was run by amateurs or were ill-conceived from the start. The Bitcoin price corrected and is currently likely crashing. Consequently, we see ourselves in the third phase.
Trough of Disillusionment
The ICO craze ended in a financial bloodbath for many investors. Not a single cryptocurrency has disrupted its sector. The breakdown of the prices is a logical consequence of that. The Bitcoin price is relatively low but there is still room to fall even lower. The Altcoins have performed even worse in total. It is questionable for most of these coins whether they will ever recover. However, that does not mean that all Altcoins are useless entirely. Already towards the end of the ICO craze, the hunt for massive gains and disruption vanished for something else: partnerships and real-use-cases.
Normally, this changed attitude would be an indication of the next phase of the Hype Cycle. We are going to talk about it in part 2 of this article. Here we will close the article with the thought that cryptocurrencies are not an usual technology. Bitcoin is not only a technological innovation but also a financial, political and social one.
Unlike for example the 3D-printing technology. Just a few years ago the technology went through a hype. Everyone talked or heard about it. But ultimately, it was and is, as of now, of little use in our everyday’s life. But the technology remains very useful in special sectors like medicin or in architectural engineering. We can see how the text book model of the Hype Cycle perfectly fits well to the reality of 3D-printers. But can we really say the same about Bitcoin?
Read Part 2.