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The digital asset market, like any other market, is fundamentally driven by human input. At the end of Q3 this year, the Bitcoin (BTC) network recorded 351 417 daily transactions and the industry continues to be mostly retail-aligned. Retail investors are particulary exposed to emotional investing and trading, furthermore the access to higher-level information is scarce and limited. Additionally there’s a clear information asymmetry, granting a de facto edge to institutional investors.
Mimetism and Investing
The mimetic theory can be used to interpret retail investor behavior, yet it also might (more or less) apply to institutional investors. The mimetic theory of desire is an explanation of human behavior and culture which originated with the French historian and polymath René Girard. The name of the theory is derived from the philosophical concept mimesis.
In mimetic theory, mimesis refers to human desire, which Girard thought was not linear but the product of a mimetic process in which people imitate models who endow objects with value. Girard called this phenomenon mimetic desire. Girard described mimetic desire as the foundation of his theory.
“Man is the creature who does not know what to desire, and he turns to others in order to make up his mind. We desire what others desire because we imitate their desires.” - René Girard
Girard’s mimetic theory states that the desire is born out of the contemplation of someone else who is desiring something and who designates to the other the object of desire. The following chart shows the triangular relationship between speculator, model, and object of speculator. Speculator imitates the model and follows the path to object of speculation. This is called mimetic desire.
The mimetic theory also applies to digital asset markets, the following chart portrays investor making an allocation. He or she (mimetically) follows a model by mimetic desire. Retail…
