Reflexivity in Crypto and the BDP Data Market
Reflexivity is a critical concept to understand for crypto market participants. What is it? Wikipedia defines reflexivity as ”the self-reinforcing effect of market sentiment, whereby rising prices attract buyers whose actions drive prices higher still…The same process can operate in reverse leading to a catastrophic collapse in prices.”
Crypto is incredibly reflexive. An example of positive reflexivity was COMP during DeFi summer in 2020. People lent and borrowed on the Compound platform solely to farm COMP. This increased TVL in Compound protocol, pushing up the value of COMP, and further incentivizing usage of Compound.
On the other hand, a negative feedback loop can occur. See LUNA May 2022.
The BDP Data Market is also reflexive. The more users, the greater the datasets being traded and consumed on the platform, leading to more usage. We aim for organic growth, which is the only type of growth that is sustainable and long lasting (so that reflexivity does not kick in on the way down). To generate growth, we are first and foremost focused on publishing quality, commercially valuable data from professional data providers. The next goal is onboarding data buyers to grow usage of the Data Market. This is key to driving a positive feedback loop.