What can the dotcom bubble teach us about the crypto market?

26 Nov, 2018 | Updated: 26 Nov, 2018
by Will Heasman
What can the dotcom bubble teach us about the crypto market?

Time and time again the cryptocurrency gets compared to the dotcom bubble; an era in which a simple tag of .com on the end of your company name, almost guaranteed a price hike.

The dotcom bubble (as the name suggests) eventually burst, and the wheat was separated from the chaff. No longer could a company simply ride the wave, fundamentals started to matter and people began to open their eyes to that; but nonetheless, prices were at an all-time low, with some citing losses of 95%, (sound familiar?). The companies that did succeed and went on to realize profits, had real use cases and sound business models.

It's understandable then that the crypto industry gets tarred with the same brush, with many speculators calling the bubble, and dooming most start-ups to obscurity. However, this needn’t be a bad thing if we continue using the dotcom era as an analogy.

Fred Wilson- a prominent venture capitalist in Silicon Valley - is one a propagator of the correlation between the 200 bubble and the crypto industry. In his blog he compares the current cryptocurrency market to that of Amazon’s low point: 

“So while crypto asset prices are down 80-95% in USD terms over the last year, they could and probably will go lower. Amazon was down 80% a year into the post-bubble bear market and it got cut in half again before it made a bottom almost two years after it peaked. What we have yet to see in crypto land is when they kick you when you are down. And that is certainly coming.”

Currently, Amazon boasts a market cap of $734.46 billion (USD) trading at a price of around $1500 per share, a far cry from the early 2000s when stocks sat at just $6 in the post-bubble bear market of the dotcom era. Furthermore, the “bubble” for Amazon reached a peak of $90 in 1999, 17 years later its more than 15x that price.

If the analogy holds, and cryptocurrencies follow the same trend as the dotcom era, speculators such as Wilson could be right; this might just be the start of something big.

Read more: Fred Wilson says it might be time to start buying Ethereum again

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Read more about: Bitcoin (BTC)

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