I've called Bitcoin "an integer with a story", and the story part is what differentiates it from purely speculative bubbles like Beanie Babies. But I think that dynamic is more complicated and subtle than Krugman gives it credit for. There are layers!https://twitter.com/paulkrugman/status/1395073993967816705 …
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This is why I have been particularly fascinated with GameStop, whose stock has been co-opted into a de facto cryptocurrency that only goes down to the "meme" layer and stops there. And it's much easier to trade! They took the bottommost turtle out of the stack and are doing fine
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This search for the right pairing between story and speculative asset is the big research project in cryptocurrencies right now. Do you rebuild the motor with fancy new tech (Ethereum, Chia), or do you focus on the styling and fun? (Dogecoin). What story sells itself best?
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There's of course an alternative possible pathway for capital, which would be to fund innovation, build companies that created genuinely useful goods and services, and so on. But that pathway has been broken for over a decade, and so we get this bizarro economy instead
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On an artistic level, a currency that you can't trade, safely store, or buy things with, and a store of value that becomes instantly illiquid in any crisis, is a high achievement. And of course NFTs where you burn actual art after putting it on the blockchain make it next level
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The right way to think of cryptocurrency is not as a bubble, but a blister. It will just keep re-filling every time it pops, until we find a cure for the underlying problem.
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End of conversation
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Ah, pyramids of beliefs in complex financial instruments. When has this ever gone wrong before?
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A lot of it is Keynes’ beauty contest
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