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

27 Pages Posted: 16 May 2020 Last revised: 18 May 2020

See all articles by Tobias Huber

Tobias Huber

ETH Zürich

Didier Sornette

ETH Zürich - Department of Management, Technology, and Economics (D-MTEC); Swiss Finance Institute

Date Written: May 12, 2020

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

JEL Classification: E40, G01, O40

Suggested Citation

Huber, Tobias and Sornette, Didier, Boom, Bust, and Bitcoin: Bitcoin-Bubbles As Innovation Accelerators (May 12, 2020). Swiss Finance Institute Research Paper No. 20-41, Available at SSRN: https://ssrn.com/abstract=3599179 or http://dx.doi.org/10.2139/ssrn.3599179

Tobias Huber

ETH Zürich ( email )

Rämistrasse 101
ZUE F7
Zürich, 8092
Switzerland

Didier Sornette (Contact Author)

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

Scheuchzerstrasse 7
Zurich, ZURICH CH-8092
Switzerland
41446328917 (Phone)
41446321914 (Fax)

HOME PAGE: http://www.er.ethz.ch/

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