Remember the dot com bubble? If no, we’ll break it down for you. Well, it was a popular era where a .com attached to a company’s name would guarantee a price hike. You may now be wondering, “What happened to the bubble?” Well, your guess is as good as ours. Of course, it has burst! This led to the eventual separation of the wheat from the chaff. Consequently, other key growth fundamentals began to matter, ensuring that businesses didn’t ride on the popularity of the domain name to succeed. However, the prices were at an all-time low. In precise terms, some companies lost up to 95%.
Is the cryptocurrency industry a bubble like dot com?
Despite the fact that many dot com companies were collapsing, some of them still experienced substantial success. However, it is noteworthy that the companies that excelled were those that had sound business models and real use cases.
When it comes to the cryptocurrency industry, we have seen many skeptics compare the burgeoning crypto industry to a bubble. Is it fair to tar the crypto industry with the same brush? In truth, those who do that have their reasons for doing so. This is particularly true since the crypto ICO boom hit its peak in 2018.
Additionally, many companies are launching cryptocurrency products and services. Therefore, the frenzy is high. To be clear, if we continue to use the dot com era as an analogy, it wouldn’t be a bad idea.
Correlating the bubble with crypto verse
One of the proponents of the concept is Fred Wilson, a venture capitalist in Silicon Valley. In an explanation in a blog post, Wilson compared the current cryptocurrency market to the low point of retail giant Amazon. In fact, the venture capitalist made an interesting comparison.
He explains that even though the current prices of cryptocurrencies have dipped by 80-95%, it could get worse. In comparison with Amazon’s performance, it was down by 80% in the post-bubble bear market. And it got a lot worse. However, the retail giant recovered almost two years later and reached its peak. Sounding like a typical prophet of doom, Wilson noted that the cryptocurrency prices will continue to fall.
How Amazon bounced back
A sneak peek into Amazon’s current performance shows that it has an MCAP of $734.46B USD with its per unit share trading at $1,500 USD. This is is a far cry from its performance in early 2000, when the same share was worth $6 USD per share prior to the dot com bubble. Interestingly, in 1999 Amazon shares sold at $190 USD . But today it has multiplied by significantly.
In conclusion, if this analogy holds, then Wilson is right and his analysis will propel the market into something big.