What the Mainstream Doesn’t Get

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The real demand for bitcoin will not be known until a global financial crisis guts confidence in central banks and politicized capital controls.

I’ve been writing about cryptocurrencies and bitcoin for many years. For example: Could Bitcoin Become a Global Reserve Currency? (November 7, 2013)

I am an interested observer, not an expert. As an observer, it seems to me that the mainstream–media, financial punditry, etc.–as a generality don’t really grasp the dynamics driving bitcoin and the other cryptocurrencies.

What the mainstream does get is speculative frenzy. New technologies tend to spark speculative manias once the adoption rate exceeds the Pareto Distribution’s critical threshold of 4%, and opportunities to buy into the new technology become available to the general public.

Just as radio and the Internet sparked speculative manias in their boost phase, cryptocurrencies have sparked their own speculative frenzy.

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Where the mainstream goes wrong is assuming that’s all there is to bitcoin: a speculative mania. The Establishment often dismisses transformative technologies as fads or gimmicks; thus the infamous rejection of photocopy technology as only of interest to a dozen large corporations, personal computers belittled as being of limited utility (storing kitchen recipes), and so on.

New transformative technologies develop in an unpredictable fashion, and early-phase critics and prognosticators often end up looking foolish on both ends of the spectrum: by dismissing the transformative potential of the new technology (Paul Krugman’s famous obituary for the Internet in the late 1990s) or by making fantastic claims that exceed the reach of the current technology.

The mainstream also misses the core driver…

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