🔁 [Analysis] The Narrative Bubble Loop - Tony Sheng

If history provides any indication, the recent rise and fall of cryptoassets will not be the last bubble according to Tony Sheng. These periods can be driven by narrative, which Jeff Tong describes as "a cohesive story or account of events, experiences, or phenomena, whether true or fictitious." Bubbles tend to form around periods where:

• Investors have a lack of reliable or relevant historical data to form valuations
• Conditions that attract retail investors, oftentimes poor regulation
• The relative strength of narratives are able to grab attention in an opportunity-rich investment environment

From here we get mass movements, where true believers back their respective assets and discourage others even if they are not directly competitive. This conflict is particularly visible at the tail end of a speculative bubble, as the true believers of a movement stick around despite falling asset prices, hoping to build a foundation for the next group. The end of a bubble therefore becomes a time for adherents to test beliefs, and help build the foundation for the next speculative bubble.