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

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  • Tobias A. Huber
  • Didier Sornette

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.

Suggested Citation

  • Tobias A. Huber & Didier Sornette, 2022. "Boom, Bust, and Bitcoin: Bitcoin-Bubbles as Innovation Accelerators," Journal of Economic Issues, Taylor & Francis Journals, vol. 56(1), pages 113-136, January.
    • Handle: RePEc:mes:jeciss:v:56:y:2022:i:1:p:113-136
    DOI: 10.1080/00213624.2022.2020023
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    Cited by:

    1. Foglia, Matteo & Miglietta, Federica, 2024. "Does every cloud (bubble) have a silver lining? An investigation of ESG financial markets," Journal of Behavioral and Experimental Finance, Elsevier, vol. 42(C).
    2. Alex Zarifis, 2024. "Leadership in Fintech Builds Trust and Reduces Vulnerability More When Combined with Leadership in Sustainability," Sustainability, MDPI, vol. 16(13), pages 1-13, July.
    3. Sergio Luis Náñez Alonso & Javier Jorge-Vázquez & Miguel Ángel Echarte Fernández & David Sanz-Bas, 2024. "Bitcoin’s bubbly behaviors: does it resemble other financial bubbles of the past?," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.

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