What mania? It is described as a mental illness characterized by excessive excitement, euphoria, erroneous ideas and overwork. In investing, it is translated into investment decisions driven by fear and greed without restraint on analysis, reasoning or balance of risk and reward consequences. The mania is always running parallel to the growth of the product business, but time can sometimes run askew.
The late 90’s technology.com boom and the cryptocurrency boom are now two examples of how to move a mania in real time. These two events will be presented at each stage of this article.
The Idea Stage
The first stage of a miracle begins with a good idea. The idea is not yet known to many people, but the potential for income is huge. It is often interpreted as unlimited income, because “something like this has never been done before”. The internet is such a case. People who use paper systems at the time doubted as “how can the internet replace such a familiar and rooted system?” The backbone of the idea began to build. It translates to modems, servers, software and web sites needed to get the idea of something tangible. The stage investments in the idea started to be lacking and made by people “knowing”. In this case, it could be visions and people working on the project.
In the world of cryptocurrency, the same question is asked: How can a piece of crypto code replace our financial system, contract system and payment systems?
The first web sites were crude, limited, slow and annoying. Doubts look at the words “information superhighway” that visions are typed and say “how does it work?” The forgotten element here is that ideas start with the worst, and then change into something better and better. This sometimes happens because of better technology, better size and cheaper cost, better application for the product mentioned, or more familiar with the product combined with good sales. On the investment side, the early adopters entered, but there was still no euphoria and astronomical returns. In some cases, the investment has provided a decent return, but not enough to move most of the jump. This is equivalent to a slow internet connection in the 1990s, internet sites crashing or incorrect search engine information. In the world of cryptocurrency, it has witnessed the high cost of mining for coins, slow transaction times and hacking or stealing accounts.
The word started to come out that this internet and “.com” is the hot new thing. Products and translations are fine, but due to the large scale involved, the cost and time spent can be overwhelming before everyone else. The equation investment aspect begins to take precedence over business growth as the markets sell the potential of a business with an investment price. Euphoria begins to become material, but only among the early adopters. This is happening in the cryptocurrency world with the explosion of new “altcoin”, and the mass media press that has taken over the space.
This phase is dominated by parabolic returns and potentially offered on the internet. I don’t really care about implementation or problems because “the returns are huge and I don’t want to lose”. The words “irrational exuberance” and “mania” began to become commonplace as people bought out of greed. Risks of damage and worthlessness and largely ignored Symptoms of surprise include: Any company that has.com in the name of its red heat, analysis thrown out the window in favor of opticians, investment knowledge diminished and less clear among new entrants, the expectation of 10 or 100 bagger returns is average and few people actually know how the product will work or not. It plays into the world of cryptocurrency with its famous return at the end of 2017 and the company’s share incidents that reached hundreds of percentage points by using the “blockchain” on their behalf. There are also “takeover offers” where shell companies are listed in exchange but sleepless their names have been replaced with something blockchain-related, and the features are sudden sold.
Crash and Burn
The business landscape for new products is changing, but not nearly as fast as changing the investment scene. Later, a mindset switch will appear and a lot of sales will start. The injuries were severe, and many “weak hands” were removed from the market. Suddenly, the analysis is used again to justify these companies being worthless or “overvalued”. Fear spread and prices rushed to the bottom. Companies without income and who will survive the hype and future prospects are eliminated. Incidents of fraud and deception that increase to exploit greed are exposed, causing greater fear and selling security. Businesses with money are quietly investing in the new product, but the growth rate is slow because the new product is a “bad word” unless revenue is shown. This is starting to happen in the cryptocurrency world with the proliferation of lending schemes using cryptocurrencies and even higher incidents of coin theft. Some of the marginal coins fell in value because of their speculative nature.
At this stage, the investment scene is burned with stories of loss and bad experience. Meanwhile, the good idea comes with the property and for the businesses that use it, it is a factor. It begins to be implemented in daily activities. The product began to become standard and the visionaries were quoted as saying that the “information superhighway” was real. The average user notices an improvement in the product and it starts to adopt the majority. Businesses with a real profit strategy hit during the collapse and burning stages, but if they have the money to survive, they will get it in the next wave. This has not happened in the cryptocurrency world to date. The expected survivors are those with tangible business cases and corporate support – but see who these companies and coins are.
The Next Wave – Hype Reaches Business
At this stage, the new product is the basis and the revenue will be clear. The business case is now based on earnings and size rather than idea. A second wave of investment appears to have begun these resilience and escalated into another early stage of wonder. The next stage is described by social media companies, search engines and online shopping all of which originate from the original product – the internet.
Manias work in a pattern that plays the same trend over time. Once one knows the levels and the thought process of each, it is easier to understand what is going on and the investment decisions can be clearer.