Physicists are constantly rethink the way bubbles burst. It’s one of those nagging problems in physics, deceptively simple, like working on the forces that keep a bicycle upright. The problem is, if bubbles appear around us all the time, those pops happen in a fraction of a second, making the basics hard to glimpse. But a few years ago, using unusually fast cameras, scientists noticed an unusual phenomenon: the bubbles, when they rupture, form many more bubbles – “daughters,” they call them – that surround the parent. In other words, a bubble contains countless more that are waiting to be created and destroyed in an instant.
How many bubbles are waiting for this speculative spring? Over the past few months, money has drifted away from reality and entered new areas of weirdness: non-fungible tokens, memecoins, and action. Ask an economist why, and he’ll tell you that money has had few places to go. During the pandemic, a lot of money was printed. For many people, they went straight to groceries and rentals; but others were already flush and looking for feedback. Money could not be left in cash, as cash did not pay and inflation was threatening; bonds don’t return what they once did. So, at first, stocks were the smart choice, especially tech stocks whose soaring values could be rationalized with the year of working remotely.
But logic can only carry an assessment to so many trillions of dollars. So why not invest in Bitcoin? People have piled up and value has hit sky-high and perhaps worrying highs, recently surpassing $ 60,000, and helping along those NFTs and Dogecoins. Even many of these investors fear a bubble, so they are eager to launch Coinbase, the cryptocurrency exchange considered to be a safer and friendlier exposure to the world of crypto. Today, Coinbase will begin trading on the Nasdaq as a $ 100 billion company, at least on paper, among the most valuable debuts in history and roughly tied with Facebook in 2012. It This is certainly solid ground.
Market debuts are meant to say something about the future. A group of bankers and venture capitalists work together to decide the value of something now, based on expectations of how it will grow. Coinbase today is based on buying and selling coins like bitcoin and taking fees for it; the future Coinbase is built on something bigger, involving more coins and a wider range of cryptocurrency-infused products, like NFTs and “decentralized” loans. Some analysts are skeptical. One wonders if this “cryptoeconomy,” as Brian Armstrong, CEO of Coinbase says, will turn out to be as big as promised. Critics have pointed out that even if this reality materializes, the industry will attract more competition (as it has already done) and lower Coinbase’s fees.
Meanwhile, Coinbase is a Bitcoin company. It has never been exactly a secret, but its public listing documents indicated that around 60% of the company’s revenue comes from Bitcoin’s trading fees. In any case, the other coins traded on its platform go up and down with bitcoin. (Another mother bubble and its daughters.) Society depends on bitcoin’s volatility and its upside potential. Amid the crypto price spike earlier this year, the company’s first quarter revenue was $ 1.8 billion, more than anything last year. In 2019, when the price of bitcoin was much lower and no one was talking about it, Coinbase lost $ 30 million.
All of this means that Coinbase’s listing is a bit like the early days of Bitcoin on the stock exchange. Which is weird, when you think about where bitcoin started. In his book 2019, Narrative economy, Nobel Prize-winning economist Robert Shiller describes the rise of bitcoin as a storytelling feat. There was the advantage of being the first, he writes, and in the unique independence of technology from authority, which, according to history, made it a protection against the collapse of government and inflation. Others, including Bloomberg’s Joe Weisenthal, have gone so far as to call bitcoin a “faith-based” asset. Faith as in religion. It started with his pseudonymous prophet, Satoshi Nakamoto, who compiled the code and is gone. It contains code words, a sacred white paper, a ritual calendar for “halving” the creation of new blocks on the chain. Yes, all assets require faith. But faith in the dollar isn’t faith in physical paper or a coin, it’s in the US government. With Bitcoin, faith is in the thing itself, the network that generates the coins and keeps them secure.