Boom, Bust, and Bitcoin: Bitcoin-Bubbles As Innovation Accelerators

Tobias Huber and Didier Sornette
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Tobias Huber: ETH Zürich
Didier Sornette: ETH Zürich - Department of Management, Technology, and Economics (D-MTEC); Swiss Finance Institute

No 20-41, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Bitcoin represents one of the most interesting technological breakthroughs and socio-economic experiments of the last decades. In this paper, we examine the role of speculative bubbles in the process of Bitcoin’s technological adoption by analyzing its social dynamics. We trace Bitcoin’s genesis and dissect the nature of its techno-economic innovation. In particular, we present an analysis of the techno-economic feedback loops that drive Bitcoin’s price and network effects. Based on our analysis of Bitcoin, we test and further refine the Social Bubble Hypothesis, which holds that bubbles constitute an essential component in the process of technological innovation. We argue that a hierarchy of repeating and exponentially increasing series of bubbles and hype cycles, which has occurred over the past decade since its inception, has bootstrapped Bitcoin into existence.

Keywords: Bitcoin; Money; Cryptocurrencies; Financial Bubbles; Technological Innovation; Economic Growth; Reflexivity (search for similar items in EconPapers)
JEL-codes: E40 G01 O40 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2020-05
New Economics Papers: this item is included in nep-hme, nep-ino and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2041

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