When studying market cycles, beware of survivorship bias.
The star projects still being discussed today are the survivors of the last round of competition. Projects that went to zero, were delisted, or lost liquidity are often missing from backtests. Looking only at the winners can lead you to overestimate the odds that “surviving a bear market means you’ll bounce back.”
A proper review should retain the complete sample as it existed at the time, account for failures and exit costs, and then assess whether capital, users, and supply have changed. A cycle may repeat the same sentiment, but it doesn’t promise that every asset will return to its previous high. #MarketCycles
The star projects still being discussed today are the survivors of the last round of competition. Projects that went to zero, were delisted, or lost liquidity are often missing from backtests. Looking only at the winners can lead you to overestimate the odds that “surviving a bear market means you’ll bounce back.”
A proper review should retain the complete sample as it existed at the time, account for failures and exit costs, and then assess whether capital, users, and supply have changed. A cycle may repeat the same sentiment, but it doesn’t promise that every asset will return to its previous high. #MarketCycles