Purpose
Show people that speculation isn’t random — it follows the same emotional, financial, and social pattern every time.
From tulips to crypto to penny stocks to meme trades, speculation is a repeating script.
Core Principle
Speculative Cycles = Recycled Human Behavior**
The asset changes.
The story changes.
Technology changes.
Human psychology does not.
Every speculative boom — no matter the era — follows the same sequence.
The 8-Step Speculative Cycle
1. A New Story Appears
It begins with a compelling narrative:
“This changes everything.”
“This time is different.”
“The future belongs to this.”
“Everyone else is missing it.”
The story is the ignition.
The fundamentals are usually weak or unproven.
2. Early Prices Start Rising
A small group of early believers gets rewarded.
They share their gains.
Other people notice.
This phase creates the illusion that prices rise because the asset is "special" — not because demand is surging temporarily.
3. Media Attention Amplifies Everything
News headlines accelerate interest:
Human belief shifts from curiosity → envy → urgency.
4. FOMO Takes Over
Fear of Missing Out replaces rational analysis.
People say things like:
This is the most dangerous phase — when non-investors enter.
5. Leverage Appears
Speculation accelerates when people borrow to buy:
Leverage injects fuel into the bubble and accelerates the final run-up.
Almost every major crash in history involved leverage.
6. Prices Disconnect From Reality
Valuations no longer relate to:
cash flow
use cases
adoption
economics
rational expectations
People justify absurd prices with:
This is the peak.
7. A Trigger Breaks Confidence
The end never starts with a gradual decline.
It starts with a shock:
bad news
regulatory action
a failed project
a big holder selling
liquidity drying up
Confidence collapses much faster than it formed.
8. The Crash Feels Instant
Once the story breaks:
buyers disappear
leverage unwinds
forced selling begins
liquidity evaporates
Prices fall much faster than they rose.
Many assets do not recover.
People who speculated late take the biggest losses.
The Speculation Equation
Speculative cycle severity can be summarized as:
Magnitude of Crash = Narrative Strength × Leverage × Speed of Adoption
The stronger the story → the bigger the bubble.
The more leverage → the harsher the collapse.
The faster the rise → the faster the fall.
What This Lesson Teaches
People learn:
Speculation is predictable, not mysterious.
Every bubble follows this pattern.
The feeling of “it’s different this time” is the signal, not the exception.
Price movement is not evidence of value — it’s evidence of psychology.
Understanding the cycle lets you avoid being the last one holding the bag.
