In the context of everything else, cryptocurrency is not a bubble

Before the advent of computers and the wave of automation that followed, the bottleneck of value creation in the economy was the rate of production of goods and services. If someone had the skills to efficiently produce a large quantity of something useful, that person would likely have been able to capture a lot of value from the economy; it didn’t matter too much that other people elsewhere in the world were also producing similar goods/services — In the absence of a single global marketplace, industries were naturally decentralized based on geography.

In the modern age, however, due to the combination of automation and globalization, the bottleneck of value creation is no longer the ability to mass produce goods and services; it is the acquisition of customers. This is why advertising and media have become such powerful forces in our economy — Brand awareness, instead of quality or production efficiency, has become the most significant differentiator between competing products/services.

With the advent of search engines and social media, the game of acquiring customers has changed significantly. Because the number of (online) media channels is now essentially unlimited and unregulated, it has become trivial for companies to monopolize them one at a time. There are many ways for a company (or a group of companies) monopolize a media channel, some of them are:

• Buy out (or forge alliances with) blogs/publications which produce popular content and use them as vehicles to promote the company’s agenda.
• Buy out advertising space related to certain search engine keywords by offering to pay a high CPC/CPM to ‘price out’ the competition from targeting those keywords. The more ads a company buys, the more clicks they get, the cheaper their CPC is.
• Buy out advertising space which targets certain social media profiles by offering a high CPC/CPM to ‘price out’ the competition from targeting those kinds of social media profiles.
• Sponsor influencers to exclusively promote the company’s products or services.

By creating and/or mediating the majority of popular media channels, a small number of large firms and corporations have gained the ability to essentially sell monopoly rights over specific media channels to the highest bidder — This has turned into a zero-sum game in which companies weaponize their capital against each other by driving up the price of CPC and CPM advertising. Large tech corporations like Google and Facebook create virtual battlefields and then make a profit by selling weapons to all sides; whoever spends the most wins the war. Because the monopolization of media channels is an expensive but predictable winner-takes-it-all game, it follows logically that corporations would be the biggest winners and that this would result in increased centralization.

A common alternative explanation to justify why corporations are getting so big is that they are more efficient in a macroeconomic sense. Some common beliefs include:

1. Corporations leverage economies of scale to improve efficiency and deliver maximum value to customers.
2. Corporations help to centralize wealth (I.e. there is only a handful of highly paid CEOs and executives for every tens of thousands of poorly paid employees); more wealth in fewer hands creates an illusion of monetary scarcity for everyone else; this illusion incentivizes the masses to work harder for the same amount of money. The world’s total money supply may be increasing rapidly (thus diluting the intrinsic value of money), but because of wealth concentration, the masses do not actually notice the surplus wealth in the economy; this hidden wealth helps to keep inflation metrics low whilst providing the rich with the kinds of nominal ROIs that they expect.

While the points above may hold some truth, they are not the root cause of why corporations keep getting bigger. Even though it’s true that economies of scale do deliver certain efficiency benefits, in many cases, it’s likely that those benefits are cancelled out by corporate inefficiencies such as bureaucracy and the sheer unnecessary complexity that plagues most corporate systems. It could be argued that the bigger a corporation becomes and the more industries it monopolizes, the more inefficient it becomes. Hypothetically, if a corporation managed to monopolize all industries within a country, it might end up just about as fair and economically efficient as a typical a communist government operating a planned economy.

The second point which advocates concentration of wealth as a way to improve economic efficiency makes sense in terms of limiting global consumption but it does so at the expense of production efficiency.Moreover, concentration of wealth fosters an economic environment which most people would consider unfair; it turns capitalism from being a game of skill to being a game of attention-seeking and social manipulation. One of the root problems of wealth concentration is that such few people end up with so much wealth that they do not have the mental bandwidth to spend it efficiently; instead they naively invest bulk sums into hedge funds, mutual funds, venture capital funds, indexes, stocks and bonds (which further perpetuates inefficient corporate growth and wealth inequality) — On the occasion that they do invest in small ventures, members of the wealthy elite tend to only invest in startups operated by their friends and acquaintances. Talented people who do not have direct connections to wealthy individuals are essentially locked out of the so called “free market”; in the tech industry for example, there is essentially only one path to success:

1. Get accepted into a tech incubator (to get access to the media channels and to the VC funding channels that they control).
2. Raise funding from Venture Capitalists (not necessarily to get funding but mostly to get access to the corporate acquisition channels that they control; or to get access to the IPO market).
3. Either get your startup acquired by a big corporation or do an IPO.

It should also be noted that in the US, regular people (who are not accredited investors) are not even legally allowed to invest in promising startups once they’ve started on this magical 3-step journey. In order to become an accredited investor to participate in this scheme, you need to either have assets totalling over $1 million or you need to earn over $200K per year. See https://www.wikihow.com/Become-an-Accredited-Investor

What a startup does and what value it brings to society are just minor details which can be factored out completely. Because corporations collectively have a monopoly over all major media channels, they don’t need to be efficient to make a profit, they can keep acquiring useless startups and shutting down random projects at a very generous pace and still turn a profit.

Blockchain technology is different in that it offers a way for people to create and invest in tech businesses outside of the incestuous 3-step process described earlier. When someone buys a cryptocurrency, most of the money goes directly to the people/organizations who created the coin; those are the same people who will be developing the underlying services (or the ecosystem of services) which gives (or will give) intrinsic value to the coin. Unlike with stock market investing, money invested in cryptocurrency will not be used to fund an army of incubators, “journalists”, VCs, corporate executives, corporate lawyers, investment bankers, M&A consultants, lobbyists, etc… There is no point in asking the question “is cryptocurrency bubble?” without also considering the economic context that made it valuable in the first place.