Michael Casey, chairman of coindesk’s advisory board and a senior advisor at MIT’s Digital Currency Initiative has a different view of the much-discussed ‘Bitcoin Bubble’. While most commentators present a ‘bubble’ as a harbinger of doom, he sees it as a positive situation.
He likens it to the late 1990s dot-com boom, and while he acknowledges that there are some who will disagree with him, he has suggested that what he refers to as the “Pets.com phenomenon” was a constructive event and that we should approach the ‘crypto bubble’ from the same perspective.
How does he reconcile the ‘boom and bust’ of the dot-com era with a positive outlook? Read on and find out.
Yes, he admits that many crypto coins will fail and people will lose money. But, he applies a theory from Carlota Perez, a Venezuelan theorist who wrote about the interplay between technology and capital markets in an influential book called “Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages.”
She claims that bubbles and their collapse are “an integral, in fact necessary, part of the economic dynamics through which transformational technologies take root in society.” Speculation, she says, is unavoidable element during time of technological transformation. Actually, the same could be said of gold, spices and tulips. As Casey puts it, “Whenever a new technology contains a wide-enough accepted promise that it can redefine core aspects of how our economy functions, people start throwing money at it.”
Why do we behave like this? According to the theory it’s because nobody really understands how things will turn out, and who the winners and losers will be. We just know that something big and important is happening, so we all get involved in wild and unstructured speculative behaviour.
Mike Casey believes we should see the ‘crypto bubble’ as “an affirmation that the technology we’re all so excited about it does indeed have huge potential even if it is still too nascent for major, disruptive deployment in the mainstream economy.”
How this will play out, nobody yet knows, but if Casey is right, we can be fairly sure that we’re on the road to building a transformational open-access platform that represents a collective evolutionary step – even if the bubble bursts along the way.