As technology stocks and securitized mortgages have demonstrated all too recently, just because a bubble pops doesn’t mean it’s the end of the market. Hell, it doesn’t even necessarily preclude that another bubble won’t emerge years later.
Wall Street analysts trying to figure out if JP Morgan CEO Jamie Dimon and Bridgewater Associates’ Ray Dalio are right about bitcoin - i.e. that digital currencies are frauds doomed to fail - should consider this phenomenon as they try to game out different scenarios for the future of the digital-currency market, said Ethereum co-founder Joe Lubin.
When asked by Quartz about his thoughts on whether digital currencies are in a bubble, Lubin responded with an unequivocal yes.
“Of course it’s a bubble. Hopefully it’s one in a series of increasingly larger bubbles,” Lubin said. “These bubbles bring attention, they bring value into the ecosystem. That value is recognized by software developers and business developers, and they create fundamental value and projects that grow the new architecture.”
The popularity of Ethereum’s platform, which is widely celebrated for pioneering the development of smart contracts, has helped grow the digital currency’s valuation and market capitalization. It has also helped attract a legion of volunteer developers who help maintain and update Ethereum’s code, helping to make Ethereum the de facto industry standard for ICOs, many of which are built atop Ethereum’s platform.
Lubin says that a Gartner analyst recently pegged Ethereum’s developer base at 30 times larger than the IBM-backed Hyperledger project, a competitor in the blockchain space that enjoys all the benefits of having the support of a legacy computing company that has already won the trust of business.
Turning the conversation toward the volatility in digital currencies, Lubin said it will continue to subside as bitcoin becomes more widely used.
Speaking to the volatility of cryptocurrencies, Lubin says that it’s just a matter of fewer people using them compared to traditional currency systems, and that it’s an addressable problem.
“As they get a larger and larger monetary base, I think the volatility will decrease significantly. There are many state-issued currencies on this planet that are as volatile or more volatile than bitcoin or ether,” he said.
As Quartz points out, analysts from Credit-Suisse have found that bitcoin is 11 times more volatile than the post-Brexit exchange rate between the British pound and US dollar, and three times more volatile than the price of oil.
Of course, this hasn’t prevented bitcoin from rocketing to a fresh all-time high above $6,000 a coin earlier this week. Even a third hard-fork of the bitcoin blockchain has had only a marginally negative impact on the price.
Ethereum hasn’t reclaimed an all-time high reached early in the summer, but has managed to hold on to most of its year-to-date gains.