What is mania? It is defined as mental illness characterized by excitement, euphoria, delirium, and overactivity. When investing, the investment decision encourages fears and cravings without a balance of analysis, reasons, or risk and reward results. Mania is usually parallel to the development of the product business, but times can sometimes be wrong.
The technology.com boom of the late 90s and the current cryptocurrency boom are two examples of a mania that works in real time. These two events will be highlighted at each stage in this article.
Stage of ideas
The first stage of a mania begins with a great idea. The idea isn’t known to many people yet, but it’s a great opportunity to make a profit. It usually comes back as an unlimited profit, because “it’s never been done that way.” The Internet was one such case. Those who used paper systems at the time were skeptical of “how can the Internet replace such a well-known and entrenched system?” It starts to build the backbone of the idea. The idea went back to the modems, servers, software, and websites needed to get into something tangible. Investments made in the idea phase start out in a poor way and make you “knowledgeable”. In this case, they can be auditors and people working on the project.
In the world of cryptocurrencies, the same question arises: how can a cryptocurrency replace our monetary, contractual, and payment systems?
The first websites were raw, limited, slow, and annoying. Skeptics would look at the words “information superhighway” as they were thrown by auditors and “how can that be really useful?” The forgotten element here is that ideas start at their worst, and become something better and better. Sometimes, due to better technology, larger scale, and lower costs, better application of the product in question, or knowledge of the product, it goes hand in hand with excellent marketing. In terms of investment, first-time users are entering, but there is still no euphoria and astronomical returns. In some cases, the investment has yielded a decent return, but it is not enough to make the masses jump. This is similar to the lack of information on slow internet connections in the 1990’s, the failure of Internet websites, or search engines. In the world of cryptocurrencies, high coin mining costs, slow transaction times, and account hacking or theft are a testament to this.
The Internet and “.com” are starting to say that this is hot news. Products and tangibility are being built, but due to the massive scale involved, it would be costly and time consuming before everyone can use it. The investment aspect of the equation begins to anticipate business development as markets discount the potential of the business with the price of the investment. The euphoria has begun to materialize, but only among the former. This is happening in the world of cryptocurrencies with the explosion of new “altcoin” and the big media press that is gaining space.
This stage is dominated by the parabolic and potential returns that the internet offers. He doesn’t think much about implementation or problems, “because the returns are high and I don’t want to lose.” The words “irrational exuberance” and “mania” are beginning to become commonplace because of the sheer greed that people are buying. Negative and negative risks and largely ruled out. Symptoms of mania include the fact that any company having.com.com is red-hot in its name, analytics are thrown out the window in favor of optics, investment knowledge is appearing less and less among new entrants, there are hopes of a 10 or 100 bagger return. common and few people really know how the product works or how it works. This has happened in the cryptocurrency world with the return in late 2017 and hundreds of percentage points of corporate stock fluctuations have appeared using “blockchain” in their name. There are also “reverse buy offers” where exchange-traded but stationary shell companies change their names to something that involves blockchain, and shares are suddenly actively traded.
The Crash and Burn
The new product business scene is changing, but not as fast as the investment scene is changing. Eventually, a change in mindset ensues and a big sell-off begins. Volatility is tremendous, and many “weak hands” are out of the market. Suddenly, analyzes are being used again to justify that these companies are worthless or “overvalued”. Fear spreads and prices rush down. Companies that are unprofitable and survive the hype and future prospects explode. Fraudulent and fraudulent incidents of taking advantage of greed emerge, causing more fear and selling values. Businesses with money are quietly investing in the new product, but the rate of progress is slowing down because the new product is an “ugly word” if the profits are not credibly proven. This is happening in the cryptocurrency world by using cryptocurrencies by folding loan schemes and larger events to steal coins. Some marginal currencies are declining in value due to their speculative nature.
At this stage, the investment landscape is riddled with stories of losses and bad experiences. Meanwhile, the great idea is becoming tangible and for the companies that use it, it’s a boom. It begins to be implemented in daily activities. The product is starting to become the standard and viewers are saying that the “information superhighway” is real. The average user notices an improvement in the product and begins to take it en masse. Companies with a real profit strategy take a hit in the crash and burn phase, but if they have the money to survive, they go through the next wave. This has not happened in the cryptocurrency world yet. The expected survivors are those with a tangible business case and corporate protection, but it remains to be seen what those companies and coins will be.
The Next Wave – The business is in turmoil
At this stage, the new product is standard and the gains are obvious. The business case is based on profit and scale rather than idea. A second wave of investment appears, starting with those who survived and spreading to another initial craze. In the next phase, there were social media companies, search engines and online shopping, all of which are derived from the original product – the internet.
They operate in a pattern that behaves similarly to mania over time. Once you know the phases and the thought process of each one, it is easier to understand what is happening and the investment decisions become clearer.