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Here’s the cycle of misinformed bubble investing, which really extends to all “tech” bubbles whether crypto or railroads
1) Fringe visionaries see promise of new technology & dabble. People laugh
2) New technology starts taking off. Visionaries get increasingly wealthy
1) Fringe visionaries see promise of new technology & dabble. People laugh
2) New technology starts taking off. Visionaries get increasingly wealthy
3) Early adopters see new wealth being created and join in.
4) Early adopters push new asset prices even higher, making visionaries even more wealthy
4) Early adopters push new asset prices even higher, making visionaries even more wealthy
5) Visionaries preach virtues of technology to masses in a language masses understand. Masses gets the gist, but only cares about the new wealth accrued by visionaries
6) Masses pile into original leaders of technology providers. Visionaries and early adopters get even more rich.
7) Scammers see lack of diligence by masses. They begin to promote their own offerings as “like getting in at the floor of Technology X!”
7) Scammers see lack of diligence by masses. They begin to promote their own offerings as “like getting in at the floor of Technology X!”
8) Masses pile in everywhere, indiscriminately. Everyone getting rich.
9) Early adopters see speculative crazy and slowly start exiting. Fringe stays.
10) Scammers prepare their exit, but keep promoting
11) More masses keep piling in. Early adopters who sold look foolish
9) Early adopters see speculative crazy and slowly start exiting. Fringe stays.
10) Scammers prepare their exit, but keep promoting
11) More masses keep piling in. Early adopters who sold look foolish
12) Everyone is even more rich on paper, but everyone who will enter the market is now in and fully invested. Early adopters who still believe sit on sidelines.
13) With everyone having entered, there aren’t enough bids to keep price going up
13) With everyone having entered, there aren’t enough bids to keep price going up
14) Early masses & scammers see price appreciation slowing down and exit in anticipation of momentum disappearing
15) With little bids, the early masses and scammers have to increasingly lower price of sell orders or market sell
15) With little bids, the early masses and scammers have to increasingly lower price of sell orders or market sell
16) Price in free fall
17) Everyone sees the emperor has no clothes and desperately market sells
18) Eventually, we run out of sellers. Early adopters re-enter market to buy.
19) Builders see promise of technology and start building on top of existing technology
17) Everyone sees the emperor has no clothes and desperately market sells
18) Eventually, we run out of sellers. Early adopters re-enter market to buy.
19) Builders see promise of technology and start building on top of existing technology
20) Second stage adopters see promise of the new applications being built on the new technology and support underlying technology and new applications
21) Visionaries, Early Adopters, and Second Stage adopters get increasingly wealthy, starting the cycle over again
21) Visionaries, Early Adopters, and Second Stage adopters get increasingly wealthy, starting the cycle over again
