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

Author

Listed:
  • Tobias Huber

    (ETH Zürich)

  • Didier Sornette

    (ETH Zürich - Department of Management, Technology, and Economics (D-MTEC); 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.

Suggested Citation

  • Tobias Huber & Didier Sornette, 2020. "Boom, Bust, and Bitcoin: Bitcoin-Bubbles As Innovation Accelerators," Swiss Finance Institute Research Paper Series 20-41, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2041
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    More about this item

    Keywords

    Bitcoin; Money; Cryptocurrencies; Financial Bubbles; Technological Innovation; Economic Growth; Reflexivity;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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