Throwback Thursday Posts? Maybe a Good Idea for Some Perspective
I have selected a post from the first quarter of 2018 where I suspected that the bubble truly did pop in the cryptocurrency space. In hindsight, I was completely right but didn’t put my money where my mouth is as I have shared in the losses we have seen since then. It is quite a roundtrip considering bitcoin was already below $10,000 at the time!
I will only leave the Nasdaq chart for comparison purposes as the trend has definitely continued downwards. However, the takeaways for the post continue to remain pertinent today. While the figures of some of the companies highlighted have changed (two of them actually achieved $1 trillion market capitalizations last year), the fact is that from bubbles and downtrends Companies adjust and adapt to move forward on their business model in order to succeed. Companies hurt during the dotcom have come back to become the leaders of the economy as internet has proliferated over the last two decades. Some didn’t make it but other were born.
The same could be expected from the recent experience in blockchain and cryptocurrencies as many will fail but others will survive. I have continued to voice my opinion that the filtering of the successful assets will soon be apparent as development continues and adoption grows. While nobody knows the timing, it will prove to be yet another boom and bust cycles we often see with innovative and disruptive technology!
So it looks like a Bubble, so what?
I hate to admit it but the Crypto market looks like a bear market that started as a Bubble:
Nasdaq Stock Index:
Screenshot from Yahoo! Finance
The media is celebrating its demise but I say, so what! Having seen these charts, its hard to deny the potential of this being a longer term bear market in the space. Let’s compare to the dotcom bear market and remember that despite the multi-year market decrease, there were survivors and newcomers that dominate markets today as well as those that did end up extinct.
Who didn’t make it? (Extinct, or nearly)
We have the examples of once higher flyers America Online (AOL) and Yahoo! AOL at its peak had a market cap of $222 billion! This was right after they bought Time Warner in $72 billion merger. AOL was the leader in ISP and other internet related business.
However, the failed merger led to a slow tech company that made bad decisions. The AOL brand was ultimately sold as an online media company for $4 billion. Yahoo is another example of a $125 billion company at its peak whereas today it is worth less than $5 billion. This comes to show that giants can fall if they cannot continue to innovate and provide value to their space.
Who survived? (And have done well)
We also have 2 success stories that not only survived the downfall, but are now global powerhouses with valuations reaching almost $1 trillion. Amazon was the poster child of the dotcom boom; as they saw valuations reach $29 billion in 1999 despite having repeated losses in their development stages.
As the market fell, the value of the Company dropped to $ 2.1 billion at its lows in 2001. However, the continued delivery of innovative products and distribution has lead to actual valuations exceeding $708 billion. The next example is Apple. Do I need to say more? How about saying that the Company was worth $8 billion in 2003? Now, it is the world’s most valuable publicly traded Company at $878 billion.
Born in the midst of the Bear?
One of the most promising situations of the period was the birth of new tech companies despite the bear market. It shows that good projects with value to a particular market will succeed no matter the market environment. The two examples of these are the following:
- Netflix IPO was in 2002 with a $83 million valuation. It is now worth $122 billion.
- Google IPO was in 2004 with a $23 billion valuation. It is now worth $758 billion.
In trying to sum this up, markets move all the time (up and down). Give how markets work, successful projects will survive as long as they remain relevant to the economy. Given the vision behind this new generation of techology, we will see rise and falls of many projects in the coming years. Therefore, doing homework on the general market as well as in the individual projects is the best way to identify the opportunities that will result in the big disruptors of the next decade.
Let me know your thoughts about this approach on reviewing past posts for perspectives. I wouldn’t do this every week but maybe once a month if I don’t get in trouble for repeating content. It would be interesting to see if I get more than $0.03 this time which I know I will due to my upvote value which gives some perspective in itself!
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I think the comparison of the crypto market bubble to the dotcom bubble is a good one. It will be interesting to see what crypto projects survive. Personally I'm hopeful that many will disappear. It seem like the market is currently saturated with projects and many of them are crap. Money is spread between 1000 projects and it's like gambling trying to pick a winner - in some cases. because of all the scammery it can be hard to do proper research on a project. If there were only 100 projects then all the money would flow into them and everyone would do well. But anyway, I think I read your original post when you originally posted. It sounds familiar. I'm not 100% sure though lol.
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I think that the crypto market will only end with a dozen or two of largely successful assets. Many utility tokens will be used but have little value in my opinion.
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Ive read and heard it multiple times that more millionaires are made during bear markets than any other time.
Its at these times that people have to become the most creative out of neccesity. Im looking forward to see what projects survive and even start to thrive going into the next bull market.