2017 has undoubtedly been a great year for cryptocurrencies. Despite some negative price action during the beginning of September, most cryptocurrencies have shot up in price, gaining millions of dollars in market capitalization as it has grown.
The market currently has a huge amount of attention as investors are just now seeing the massive potential that the currency has. As Wall Street firms and major businesses get involved, it will only serve to further legitimize this form of currency.
Because the market has increased in value so quickly, some investors and experts in the space are seeing it as a bubble, but this could have some upside’s to it.
According to an expert in the blockchain and cryptocurrency space, Peter Van Valkenburgh, who works for an advocacy group known as Coin Center, there are several benefits to the cryptocurrency market being a bubble.
Valkenburgh recently stated that “we’re probably in a bubble. You can look at bubbles as being socially productive.” Bubbles serve to “allocate capital to long-shot, paradigm shifting innovation,” rather than in small incremental modifications to the technology that is already existing. Looking at the dotcom bubble as a reference, it seems like there were several companies that failed and went bust as a result of the bust, but it did produce some of the largest institutions we have in today’s market.
When companies in the late 1990s saw their revenue grow immensely, new start-ups emerged creating new technologies that changed the space forever. This could be a good example of what is happening now. If the technology that is being produced right now can stay, the idea that the market is a bubble wouldn’t be that bad overall. Hopefully, if the market is a bubble, it will not burst in too large of a way.