Doesn't this mean that multimining is creating lots of bubbles?
switching, auto-exchange pools don't create the bubbles, speculators do.
the selected currency needs to be profitable in order to mine: clevermining doesn't just start mining an unprofitable coin and hope it goes up in price. the price v. difficulty has to be favourable. this doesn't happen unless speculators are actively pumping the coin's value up.
during a manipulation, the coin's value will increase faster than the network hashrate can protect it. when an auto-switch pool starts mining, the problem has already been created by the speculators engaging in a pump/dump scheme. It's the speculator's fault for pumping the coin's value, because this must happen first before an auto-switch pool starts mining the coin.
Multimining doesn't seem like a sustainable model because it introduces large and great fluctuations into altcoin markets, quickly raising the difficulties on these then abandoning them.
this is a better criticism of the entire altcoin market being unsustainable than mining.
Can anyone give a rationale as to why multimining doesn't essentially hurt itself?
I don't think miners hurt themselves by mining.
miners produce currency. they are actually exchanging the currency they made for the value they're extracting from the coin. more currency = more liquidity. there is reciprocity in a currency/mining relationship.
in contrast, speculators produce nothing of value: they're just manipulating the price to make profit for themselves. currency/speculator relationship is zero-sum, and usually the speculator wins at the expense of the currency.