How the price bubbles and getting rich will help crypto long-term

Here’s why getting rich off crypto will actually help make the planet a better place. A lot of folks looking at fundamentals tend to downplay the role of price, but I propose that the repeated bubble cycle of crypto caused by speculation is actually solving one of the most fundamental barriers to widespread adoption and use: the chicken-and-egg problem.The chicken-and-egg problem of crypto is that there is little incentive to accept crypto as a payment (e.g. by merchants) if not many people can spend it. On the flip side, there is little incentive to acquire and spend crypto if not many merchants accept it. The total number participants (buyers and sellers) is one of the key factors preventing crypto from being used as a currency more often. Until there is a critical mass of people using crypto, something else will have to encourage onboarding.However, the solution is right in front of our faces. Crypto's main use case right now isn't transacting as a currency; it’s speculation. Every time a speculative bubble emerges, new participants join the network. Even when the bubble pops, there are still more people hodling crypto than before it began, which means there are more people to spend crypto, and more incentive for merchants to accept it. This is fundamentally why the price floor goes up with each bubble – there is greater network value. Many speculators have recognized this trend and will end up wealthy if it persists.Greed is the motivator for people buying in now. Unlike early adopters, entering mainstream users are not viscerally motivated by the cypherpunk ideals of Bitcoin’s genesis: the idea of separating money from state, and use as p2p uncensorable digital cash. In essence, crypto is monetary freedom of speech. Early adopters have already bought in, but are not a large enough fraction of the population to solve the chicken-and-egg problem. Thus, speculation is needed to attract the majority.Other factors (infrastructure, transaction costs, usability) also play an important role as enablers to widespread adoption, but aren't the motivating factor for most people to buy in. Usable infrastructure is an enablement in that it must be in place to support adoption. The long-term effects of adoption will be greater price stability, and better utility.Higher prices will drive growth in the short-term until there are enough people holding/accepting crypto for the primary use case to change to being an actual currency. At that point, the vision will be realized.TL;DR: Until crypto is widely usable as currency, price increase is the main driver of adoption

Submitted July 08, 2019 at 09:40AM