Why the sector moves in waves.
WHAT HAS BEEN OBSERVED REPEATEDLY
Periods of rapid price increase, intense attention and new projects Followed by substantial decline, withdrawal and consolidation
WHAT DRIVES THE UPWARD PHASE
Rising prices attracting attention Attention attracting capital Capital funding projects Projects generating further attention
WHY THAT IS SELF-REINFORCING
Each element feeds the next, until it does not.
WHAT CHARACTERISES THE PEAK
Widespread participation by inexperienced people Projects with no product raising substantial sums Confident claims about permanence Leverage widespread
WHAT CHARACTERISES THE DECLINE
Rapid price falls Failures of over-leveraged businesses Fraud revealed, since falling tides expose it Attention disappearing
WHY FRAUD EMERGES IN DECLINES
Schemes depending on new deposits collapse when deposits stop.
WHAT SURVIVES
Projects with actual use, and organisations that remained solvent.
WHAT THAT SUGGESTS FOR BUSINESSES
Size for the quiet periods, and treat peaks as temporary.
WHAT IT SUGGESTS FOR INDIVIDUALS
That the most confident period is the most dangerous.
WHAT TO NEVER DO
Assume the current phase continues.
WHAT TO REMEMBER
That every previous peak was described as different.
