The growth strategy the many investors embraced isn’t working. WeWork, Uber, Jolt, Lyft, Fair and UiPath have all lost significant value and are laying off employees. Financing now is taking longer and behemoths such as SoftBank’s Vision Fund have taken a beating and are spooked. So, are we creeping close to a burst of the bubble? Or will it be a soft and sober deflation.
I'm sure you already know my sentiments, but let me take a moment and lay out the reasons why.
The Dutch Tulip Bubble (or "Tulip Mania") was a period during the Golden Age when the price of Tulip bulbs skyrocketed in a speculative bubble that burst, in February of 1637. Bidders had run the price of certain tulips (arguably the most gorgeous and lovely ones) to price heights that made no sense.
Speculators were mortgaging houses to buy tulips, and some of the most expensive ones could cost the value of a real house. The Dutch economy was booming, and the citizenry enjoyed the highest financial statndard of living in the world at the time. Significant amounts of discretionary income, coupled with a devaluing of the Dutch Kronur (less and less precious metals had been used for the minting of the Kronur over the previous decades) led to the very real popular concept that the price could only go up.
Of course, after European markets started trading tulip bulbs and the excitement grew to a manic phase, the bottom fell out, and people realized that there is no comparison between the value of a flower and real assets, like houses, horses, food, etc., and the market imploded.
The Dot-Com bubble of the late 1990's was similar to Tulip Mania in some ways (bubbles always are) but significantly different in ways we need to acknowledge and examine.
Speculation is always at the core of any bubble, and Tulip Mania, the Dot Com Bubble and the Crypto Run-Up of 2017 and subsequent collapse in 2018 are no exception. As greed and excitement kick in and override the Human Brain's ability to discern smart from not, the human's tendency to stampede--in either direction, up or down--is significantly increased as the amount of money involved increases.
Capitalist hegemony has imprinted directly on our hippocampuses the concept that the goal is to die wealthy; to die poor is anathema in all segments of human society. "He who dies with the most toys wins!" is a common exclamation.
So when opportunity presents itself, Humans tend to try to take advantage of it, even when the opportunity makes no sense. The Dot Com bubble was one where big industrial financing actually created the monster by throwing huge sums of money at pretty much any idea and team that had an interesting, internet based theme.
eToys.com, Baby.com, et. al., were simply brick and mortar ideas repackaged for the internet--and mostly repackaged to sell the investment. The only difference was the ".com"
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I made a plot of how the DOW will behave if we were to get a repeat of Dot-com/Great Recession or the Great Depression
https://twitter.com/econometricity/status/1240146593837469697
I don’t doubt that crypto land is in a bubble but I also don’t think we are ready to pop for at least another 18 months (although things tend to escalate quickly in crypto land)
So with that said what is your exit/profit taking strategy and what signs do we look for that it really is popping considering that coins can lose halve there value on Monday and be there ATH by Wednesday lunch.
https://www.youtube.com/watch?v=bUwu5CiESbc&feature=youtu.be
Saw this posted somewhere else and thought you guys might find it interesting. Shows how fast things can go from a complete bull market and a healthy economy to a recession.
I've been reading up on why it burst and there are some themes that emerged:
-
Taxpayer Relief Act of 1997 incentivized “average joe’s” to become investors. The stockmarket was now accessing a source of wealth outside venture capitalists thus contributing to the bubble.
-
Investors using marketcap for valuations and not P/E ratios. From wikipedia on the incorrect use of valuations:
“Some people mistakenly use the formula market capitalization / net income to calculate the P/E ratio. This formula often gives the same answer as market price / earnings per share, but if new capital has been issued it gives the wrong answer, as market capitalization = market price × current number of shares whereas earnings per share= net income / weighted average number of shares.”
In laymens terms, P/E ratios incorporate actualized profits while market caps only measure “shares” which is essentially invisible/unusable money.
-
Piggy backing off of #2: People invested in ideas but not the "money making" business model. Everyone and their mothers were trying to capitalize on eager investors so they sold the dream and advertized HEAVILY with no real plans on how to actually make a profit. In other words, many businesses were created with the intent of selling
-
Initial Public Offerings- Business would fundraise before they launched by offering investors equity. Many ".com" business' valuations were extremely overpriced because of these IPO's. When the businesses failed, the money disappeared. Some businesses/investors even took loans and defaulted because of this.
-
$$ ran out- This has two parts: 1) People stopped working and so actual spending money decreased in the U.S. economy. 2) So much money was invested in the beginning that little was left to support all the businesses that came out of the ".com" boom.
-
What ultimately popped the bubble were immense sells from large stakeholders that created "selling frenzies" making the market incredibly unstable.
Take aways from the lessons above respectively:
A) Crypto has become incredibly easy to access and is available to the whole world. This is the equivalent of the result of the Taxpayer Relief Act. I feel conflicted about this in regards to crypto because: 1) On one hand, there are billions of dollars to be accessed worldwide 2) On the other hand, there is a significant portion of $$ right now that is being put out of circulation because people are hodling. This is in
... keep reading on reddit ➡Starting today we will post all of the content that is not directly related to the Genesis Vision project on a separate Steemit account. Check it out for our thoughts on crypto, tech and more! https://steemit.com/crypto/@genesisvision/is-crypto-the-new-dot-com-bubble
I feel this is the start of a multi year epic bubble.
How many of us if we could have invested in 97 or 98 would have done so? This has the feel of the same thing but even more because of the societal implication blockchain may have.
I'm old enough to remember sitting in a dunken donuts coffee shop overhearing excited conversations about upcoming IPO's in the 90's. This shit has that feel all over again but even more intense.
Was talking to my brother today, told him, this crypto shit is the dot com bubble all over again but with the advantage of foresight. We know it's going to be a multi year bubble and we know we are at the very start of the bubble. So play your cards accordingly folks and enrich yourselves with the advantage of foresight.
RemindMe! December 01, 2020
TLDR: Online advertising is like a kid handing out discount pizza coupons in the waiting area of a pizzeria.
Just wanted to share this with my litecoin community to give some perspective as to the state of the crpytoworld.
I've been reading up on why it burst and there are some themes that emerged:
-
Taxpayer Relief Act of 1997 incentivized “average joe’s” to become investors. The stockmarket was now accessing a source of wealth outside venture capitalists thus contributing to the bubble.
-
Investors using marketcap for valuations and not P/E ratios. From wikipedia on the incorrect use of valuations:
“Some people mistakenly use the formula market capitalization / net income to calculate the P/E ratio. This formula often gives the same answer as market price / earnings per share, but if new capital has been issued it gives the wrong answer, as market capitalization = market price × current number of shares whereas earnings per share= net income / weighted average number of shares.”
In laymens terms, P/E ratios incorporate actualized profits while market caps only measure “shares” which is essentially invisible/unusable money.
-
Piggy backing off of #2: People invested in ideas but not the "money making" business model. Everyone and their mothers were trying to capitalize on eager investors so they sold the dream and advertised HEAVILY with no real plans on how to actually make a profit. In other words, many businesses were created with the intent of selling
-
Initial Public Offerings- Business would fundraise before they launched by offering investors equity. Many ".com" business' valuations were extremely overpriced because of these IPO's. When the businesses failed, the money disappeared. Some businesses/investors even took loans and defaulted because of this.
-
$$ ran out- This has two parts: 1) People stopped working and so actual spending money decreased in the U.S. economy. 2) So much money was invested in the beginning that little was left to support all the businesses that came out of the ".com" boom.
-
What ultimately popped the bubble were immense sells from large stakeholders that created "selling frenzies" making the market incredibly unstable.
Take aways from the lessons above respectively:
A) Crypto has become incredibly easy to access and is available to the whole world. This is the equivalent of the result of the Taxpayer Relief Act. I feel conflicted about this in regards to crypto because: 1) On one hand, there are billions of dollars to be accessed worldwide 2) On the other hand, there is
... keep reading on reddit ➡