The "internet bubble" marks one of the most popular periods in the stock market. From an investing perspective, it started in the mid-90s and ended with a burst in the early 2000s. Yet, to this day, it is still pretty much a major contributor to several other bubbles. Some have come and gone while others never really lived up to expectations.
There is no bubble that comes without hype. In most cases, these market bubbles are deemed to represent the next massive thing in the stock market depending on the industry they target.
The property bubble of the early 2000s to around 2007 ended badly for the global financial markets and now, we could be staring at a couple of other markets that might fail to live up to expectations or end badly for the financial community. Here is a quick rundown of some of the most hyped markets that may never live up to expectations.
Peer-to-peer lending
The fintech industry is the powerhouse behind the meteoric rise of the peer-to-peer lending market. After several platforms launched online payments, it was only a matter of time before new ones emerged offering lending services that are offered by and to registered members.
LendingClub Corp (LC, Financial) has been one of the most notable players in this space and its popularity pushed it public in 2014. However, since then, the company has struggled to live up to expectations, reflecting the actual picture of the status of the peer-to-peer lending.
According to critics, while peer-to-peer lending is an attractive option for borrowers looking for alternative financing solutions, it appears to have growth limitations due to lack of funding for new products. Peer-to-peer lending platforms do not take deposits and this is a limiting factor, but analysts suggest that if they are to grow to the point of rivaling the mainstream lending market, then they may have to start taking customer deposits.
Cryptocurrency
This has been the most hyped story over the last few years but based on the events of the last couple of months, investors might now be re-evaluating their positions on the market. The cryptocurrency market grew nearly twenty-fold between January and December last year. Currently, there are more than 1,500 altcoins in the market and many more are scheduled to launch this year.
Just a few years ago, it was all about Bitcoin, Litecoin, and Ethereum alongside a few others; but now, investors are talking about the top 300 cryptocurrencies and their prospects for growth. This has created a lot of speculation in the market. However, latest crypto prices now suggest that the market could be crumbling after a highly hyped period of trading that saw the overall market cap top $800 billion. It’s now down to a total value of just over $400 billion in less than two months.
This might create, or even justify some critical questions in the cryptocurrency market. Some analysts have suggested that the industry is built on quick sand because the crypto coins, unlike when trading stocks or commodities, lack intrinsic value, according to Berkshire Hathaway’s (BRK.A, Financial) (BRK.B, Financial) Warren Buffett (Trades, Portfolio). Therefore, this puts a cloud of doubt on the high expectation that cryptocurrencies will eventually replace fiat currencies as the preferred medium of exchange.
The market still faces a huge obstacle in the form of regulation and this could eventually bring it down. The cryptocurrency market will either triumph and replace fiat currencies or burst into obscurity. There is no sustainable neutral zone of existence.
Augmented reality and virtual reality (AR and VR)
Science fiction in movies and TV shows imagined the idea of AR and VR, but with advances in technology, this has finally come to pass. However, from a commercial perspective, the market is yet to gain traction with players still trying to integrate it into various applications that will help propel growth.
The video gaming, interior building design and the medical industries are some of the most realistic applications, but companies like Facebook Inc. (FB, Financial) are also eyeing the potential of applying the technology to its social networking platform through its acquired subsidiary Oculus Rift.
Therefore, as companies continue to explore means of utilizing AR and VR, the main challenge will be commercial feasibility, especially given the current small size of the addressable market.
The financial markets are cyclical in nature. Sometimes, they are bullish and in others bearish. Only the strong players can maintain continuity indefinitely.Â
Disclosure: I have no position in any securities mentioned in this article.
