Is the boom of bitcoin a bubble that’s about to burst? BY
VIKRAM MANSHARAMANI
MANSHARAMANI notes:
“Most mainstream
economic theories utilize a supply and demand driven price determination model
that generally results in prices tending toward equilibrium. I say “tending”
because most serious scholars admit that behavioral and informational issues
can distort the price at any one point in time, but there exists an overarching
belief that such distortions are rapidly ironed out. Markets are, according to
this view, basically efficient. Higher prices dampen demand, and lower prices
disincentivize supply.
But what if that’s not
true? What if higher prices increase demand? Such a dynamic might arise for
many reasons, but one eloquent explanation is the “Theory of Reflexivity,” as
proposed by George Soros. Although it has many subtleties beyond the “self-fulfilling”
logic that many ascribe to it, the underlying implication is that prices can
and do tend away from equilibrium. The result: booms and busts.”
UPDATE: