Cryptocurrency and network effect
The blockchain technology that underpins cryptocurrency is an example of new paradigm, network-centric thinking and not many people realize that yet. Consequently most financial experts are assuming that the same old rules apply, as in conventional markets. They are missing the network effect.
At present both old and new paradigm thinkers are playing in the cryptocurrency space, so we are seeing some pump and dump strategy causing rapid price spikes and drops. This is due to the old push it to the limit and beyond mindset which drives the boom and bust patterns we’re so used to seeing on stock markets. When you think about the terminology market bubble, a bubble is an isolated entity and the old scientific-industrial paradigm has been all about isolation, specialization and individuality.
The postmodern network-centric mindset is the opposite, it’s about connection, aggregation and community. It brings more sustainable thinking and it benefits from the network effect. I’m expecting to see market ripples instead of the old boom and bust. I’m seeing the early stages of this pattern already, with rapid growth followed by a drop and pause, then more growth. This ripple pattern will be more pronounced while the cryptocurrency market is growing rapidly, as new funds are pumped in and the network capacity approaches its limits. The growth will need to back off and wait while network capacity grows. Like the tide advancing up a beach, it will creep up and recede, then creep up some more. Since this is most likely the world’s next economic system, there’ll be a lot of wealth transfer from the old to the new system, so the overall growth trend (with ripples) should continue for quite some time. Due to the network effect this is going to be a much more stable and inclusive economic system.
It should also be noted that the potential applications for blockchain technology go way beyond economics, which is why many large corporations are already voting with their feet and joining the Enterprise Ethereum Alliance.