Yesterday, President Trump tweeted about bitcoin.
I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity…
Earlier that day, Fed Chair Jerome Powell said before the Senate Banking Committee that:
I think things like that [the obsolescence of today’s reserve currencies] are possible but we really […] haven’t seen widespread adoption. Bitcoin is a good example, almost no one uses it for payments […] it’s a speculative store of value like gold.
Even though both men took critical positions of bitcoin, their acknowledgement is good for bitcoin. There are many reasons this is the case, but I’ll focus on just one today: viral marketing.
As I wrote to members of Chamath Palihapitiya’s position that the average investor should pick BTC or ETH whichever is bigger:
This is consistent with his beliefs about virality. Easier to consume means more viral. Bigger means more viral. Bigger plus easier to consume means most viral.
A Trump tweet reaches millions of people, most of whom have no prior exposure to bitcoin. But more importantly, a Trump tweet reaches press, state and business leaders, and other influential individuals and groups that now have to decide what they make of the asset.
The world’s exposure to bitcoin spreads via media, politicians, influencers, and everyday people. And because bitcoin cannot be stopped–lawmakers can outlaw ownership of the coin, but they cannot shut the network down–no degree of negative sentiment from people in power threaten the existence of the network. So in this case, all press is good press.
The experience of the average person hearing about bitcoin on the news or from a tweet is useful to dissect. I like the sales funnel where a user goes through four stages: [1] Awareness, [2] Interest, [3] Desire, and finally [4] Action.
- [1] Awareness comes from any mention of the asset (e.g. a tweet)
- [2] Interest comes from exposure to an intriguing story that might be relevant to one’s life
- [3] Desire comes from feeling convinced that owning the asset would positively impact one’s life
- [4] Action comes from having the knowledge and confidence to buy the asset
Bitcoin holds a priviledged position as the biggest, oldest cryptocurrency. So when people talk about cryptocurrencies, they mention bitcoin: “bitcoin and other cryptocurrencies.” This gives bitcoin a disproportionate capture of [1] Awareness.
The simplicity of bitcoin’s story “digital gold,” helps with the conversion of potential holders from [1] Aware to [2] Interested.
(Aside: there’s an entire conversion funnel for BTC holders to altcoin holders that follows the same principles. Try constructing the BTC > ETH funnel to understand ETH’s relative strengths.)
Now imagine hearing about a “digital gold” for the first time because your president tweeted about it. You hear it covered on CNBC the next morning while you’re having coffee. Now you see the asset is up like a zillion percent over the last decade.
You Google around and find thousands of high quality articles from thoughtful individuals espousing the merits of the asset (and millions of articles calling it a scam, but you don’t believe them). Your favorite NFL player keeps tweeting about it.
A completely decentralized network of evangelists move you from [2] Interest, to [3] Desire. It’s such a beautiful thing.
And you can’t believe your eyes, you already have two apps that allow you to buy this asset: the Cash app and Robinhood. A couple clicks later and you’re through to [4] Action.
From there, maybe you become an evangelist (it is a virus after all) and help future holders through the conversion funnel. And the viral loop continues.
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