I've spoken about bubbles a fair bit in my posts; lol some would think I'm obsessed with bubbles, well I'm not; I'm not 5 years old okay? Bubbles don't excite me that much! Okay, maybe they do a little bit.
I've looked at the crypto bubble, the ICO bubble, the notcom bubbe and recently the NFT bubble and as I learn more about finance and how this all works, I feel like bubbles are part of the cyclical nature of markets.
My only real experience has been in the ICO bubble, where I, too, got caught up in the shitcoin mania, and it's easy to see why it can become such an infectious rally sucking in bright-eyed investors thinking they've struck gold.
Eventually, what goes up really fast rips down faster, which was true with the ICO bubble. Eventually, all assets must be repriced to fair value, and sometimes fair value is 0.
The ICO bubble burst cost investors billions as opportunists take advantage of rampant speculation and try to siphon some of the capital into scams and projects with zero "product-market fit".
Post bubble sentiment
People then write off the sector that had the bubble, and those that believe in it continue in the bear markets. The investors that made out like bandits leave in search of new yield while the bag holders lick their wounds, vowing never to make the same mistakes again, often they do.
Memories are short, and FOMO and greed are powerful human emotions.
So why do we need bubbles?
Well, as far as I can tell, it's the hivemind of human nature and how we build and discover things as a species.
The tulip bubble
Bitcoin is often compared to the Tulip mania of 1967, a period during the Dutch Golden Age when contract prices for some bulbs of the recently introduced and fashionable tulip reached extraordinarily high levels. Yes, believe it or not, but Holland had stupid money to blow in those days like the US has today, and as money looks for a home, it found one in Tulips.
Yes, it got out of hand where people were willing to offer entire towns for a Tulip. It did correct in a major way but what it left Neterhaldns with is still today's market leader in flower markets.
The railway bubble
The Railway Mania was an instance of a stock market bubble in the United Kingdom of Great Britain and Ireland in the 1840s.
Yes, it blew up spectacularly, but it left Britain with a pretty robust railway system that still works to this day.
The dot com bubble
The dot-com bubble was a stock market bubble caused by excessive speculation of Internet-related companies in the late 1990s, a period of massive growth in the use and adoption of the Internet. Yes, it left many people broken and struggling to recover, with the likes of Pets.com failing bit time and taking a host of dot com business with it.
But out of the ashes came sites like Amazon and Google, and we all know how that ended up.
Bubbles bring much-needed capital, talent and users; they all flood in providing money to build infrastructure.
Developers create new codebases and add to existing code; They bring users that promote the service and provide user data and feedback to improve the service.
Once bubbles leave, so do the users and the capital, but what they leave behind is often valuable products that may need refinement but will grow into something far more robust.
Bubbles also offer a stress test for the sector to see how far it can scale and gives the market an idea of where this could go once they are ready to scale.
Have your say
What do you good people of HIVE think?
So have at it, my Jessies! If you don't have something to comment, "I am a Jessie."
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