STREET DOGS

Once the cryptocurrency bubble bursts, there may be real innovation and a solid valuation case for many coins. – Arjun Kharpal, CNBC

Investors who lost money in the 2008 crash will find it hard to agree, but at the time New Scientist editor Sumit PaulChoudhury argued speculative bubbles were a good thing.

“In bubbles investors’ money is used to build infrastructure that can’t possibly repay its upfront costs but that nevertheless ends up being beneficial for consumers in the long run, after more efficient companies pick up the pieces on the cheap.

“Investors in dotcoms, for example, lost big time in 2000 but their money built the software and infrastructure that runs today’s internet.

“A stock-market bubble in the 1840s rendered shareholders in train companies penniless but left Britain equipped with the world’s best railway network.”

Didier Sornette, then a risk specialist at the Swiss Federal Institute of Technology in Zurich, agreed: “It is only during the reckless abandon of bubbles that individuals and companies take the foolhardy risks needed to develop technologies with large social impacts (but low financial returns) that turn into super-exponential growth rates ... pouring resources into evolving alternative power generation, electric cars, plastic substitutes — the green technologies — would be just what the planet ordered.”

“Besides,” said PaulChoudhury, “attempts to prevent bubbles seem to be largely fruitless. People have been trying to stop them since the tulip mania took hold in the Netherlands in the 1630s, to little discernible effect. Perhaps rather than pretending that we can do something about bubbles, we should surrender the illusion of control and concentrate on making the best of the bust that follows the boom.”