The Cyclical Nature of Financial Markets

Just as Annapurna IV collapsed under its own weight, economic and financial systems also experience cycles of growth and decline.

French geologists recently discovered a massive landslide in the Himalayas that occurred 800 years ago. This event moved enough earth to bury Manhattan as high as the Empire State Building. The landslide reduced Annapurna IV’s height significantly, illustrating a fundamental principle: everything is cyclical. Just as Annapurna IV collapsed under its own weight, economic and financial systems also experience cycles of growth and decline. This principle is profoundly relevant to economics and financial markets, where cycles are intrinsic to their nature.

The Inherent Cyclicality of Markets

Consider the recent surge and subsequent correction in the cryptocurrency market. Bitcoin, for example, saw an astronomical rise in value in 2020-2021, driven by speculation, institutional adoption, and a fear of missing out (FOMO). However, this rapid increase was unsustainable, leading to a significant correction in 2022. The cycle of exuberance followed by a sharp decline was driven by the market's i…