June 19, 2021

The Crypto Market and The Internet Bubble: A Reconnaissance

6 min read

The innovative technologies squiring the previous centuries have actually caused the massive replacement of one set of innovation(ies) after another, by either straight-out substitution or modernization of existing processes and methods. The accompanying routine (in addition to culture–) breaking cyclone of deeply established orthodoxies in economies have actually sped up explosive phenomenon in the financial markets. Similarly, in a bid to expand the brand-new innovation infrastructure– creating new as well as modernizing established industries, monetary capital is moved about in a craze of money-making-money with speculative financial investments and unabated euphoria, and this generates inflation of possessions as well as a gaming atmosphere within an ever-expanding bubble. These (market) bubbles however have actually been an interesting and puzzling phenomenon for both academics, monetary experts, financiers, and stock market traders as a result of their recurring re-occurrence (and nature) in the monetary markets.

Nonetheless, we are as soon as again at the crossroads where directing requirements is exclusively needed especially in the highly-volatile Cryptocurrency market. Nevertheless, cursorily browsing historical bubbles would quickly assert and pinpoint the tech-stock market collapse of the 2000s as one of the market crashes with the most similar and irresistible likeness to the financial contingencies of the Crypto market, thus a need to explore this dyad of the financial quagmire. If we neglect or fail to bewray the homogeneity in addition to the heterogeneity of this duo, how can we even pretend to comprehend the language of financial markets Or remain calm in the middle of panic-inducing conditions and even (begin to) plan to bet the long-lasting? In essence, understanding the underlying resemblances in between these dyadic advanced economic situations will help synthesize insights and complementary point of views to direct favorable action towards building the next “golden era”, while taking full advantage of the accompanying social benefits in core national economies as well as internationally in the post-covid era.

Nevertheless, in the context of this essay, our argument for the cryptocurrency market would rely entirely on Bitcoin– since it is the most well-known and widespread cryptocurrency (as plainly demonstrated by its decade-long dominating position) with its cost having causality results on alternative cryptocurrencies (or altcoins). Besides, most other cryptocurrencies are either clones, variations, or forks of the Bitcoin blockchain and combined with its high-ranking trading volume, preferable liquidity, and for this reason supplies an allowing secondary market for other cryptocurrencies and the total community to flourish. Hence we will systemically evaluate the similarities and peculiarities of these 2 markets and educe what makes Bitcoin (and its blockchain innovation) detailed and intriguing as well as unconditionally– an extremely radical technology.

The Commonalities

Although they happened at two different periods in history– the dotcom bubble belimping in the late 1990s with the fast increase in the worth of NASDAQ stocks and today highly volatile rate of cryptocurrencies, both market scenarios were driven by a new vision and idea that has actually been genealogically related to different techno-libertarian and egalitarian (in addition to cypherpunk) perfects within the areas of personal privacy, autonomy, and decentralization. While the “Dot.Com” age had actually people thrilled about the info society– a liberalized system where info can easily be accessed from anywhere around the globe, Bitcoin had the triadic concepts of trust, openness and distributed systems (DLTs) create a belief in and ecstasy for the promises of a technological-alternative to reserve bank policies and the ineffectiveness of centralized modes of company with the potential customers of the blockchain innovation.

Moreover, the patterns of both cycles have likewise been recognized to be mirror images of each other (see Figure 1) despite Bitcoin’s observed 15x faster development rate. As if that wasn’t enough, for both markets, cash– especially monetary capital from investors was a succedent– accompanying these ideas and visions.

bitcoin price vs nasdaq bubble

These financial investments, driven essentially by the trio of speculations, FOMO, and the herd mindset resulted in the close similitude in between the ICO (Initial Coin Offerings) and IPO(going public) trends and “irrational vitalities” of both eras. The resulting speculative adoption and investments gave rise to a huge selection of disputes, of utmost importance to value-investors is that of its intrinsic value. This is where the disparity between the two markets starts to emerge.

The Unorthodoxies

In the financial context of intrinsic worth, the cryptocurrency bubble and tech-stocks collapse of the 2000s are observably various. The Internet companies were hell-bent on developing market share as fast as possible, focusing considerably on marketing and advertising/commercials (this nevertheless likewise facilitated in its diffusion and speculative investment) but with no backup and underlying sustainable company model. Hence investments into the technology-based stocks (NASDAQ) were driven exclusively by speculations and future hopes for success leading to property appraisals with no supporting intrinsic worth. On the other hand, though there have actually been doubts about Bitcoin’s intrinsic worth, one glaringly outstanding is its censorship-resistant property. Bitcoin provides autonomy to store wealth in such a way that it can’t arbitrarily be taken by the federal government or external authorities, therefore is innately un-confiscatable.

Regardless, here is a more interesting and detailed feature of Bitcoin: driving the dotcom bubble was the bliss that accompanied the increase of the web, alternatively, it is Bitcoin’s blockchain innovation and of more prominence, the tri-features of buzzs (and the periodic cost variations), the innately hard-coded halving-cycle in addition to its singularity residential or commercial property that drives (and is still driving) its diffusion and mass adoption. As such, we can definitely say Nakamoto Satoshi, the pseudonymous Bitcoin programmer literally encoded an intrinsic ideology into the base layer of the procedure which has greatly catalyzed the (early and constant) proselytization (as well as adoption) of Bitcoin over the previous decade and even till date. This has actually gone ahead to promote different ideological views and beliefs like the popular believers in Hyperbitcoinization.

Furthermore, in the days of the dotcom bubble, IPOs were a type of business “bar mitzvah” for startups/internet companies(with series of previous preparation with various documents) and financiers make financial investments to own shares of these companies. Today in ICOs, financiers purchase tokens with no right to ownership instead of the stocks of the dotcom bubble. Besides stocks of the internet companies were generally offered (in addition to headquartered) especially in North America with restrictions to who can take part.

Dramatically on the other hand, with the decentralized and free-access nature of ICOs(in addition to its short preparation duration), anyone around the globe can invest, in essence, motivating transactions that go beyond national and jurisdictional limits, promoting a libertarian and democratized approach to financial investment, hence its huge interest individuals. Just with a genius concept and a clarifying white paper supporting it, and with a thousand millionaires and financiers voluntarily verifying to this idea with state $10000 of their funds– this idea is currently on its method to fruition. (However, the unregulated nature of these ICOs has actually caused the proliferation of frauds).

In conclusion, the relationship between dotcom and the crypto bubble is evidently, a remarkable one. While lots of internet companies failed in the days of dotcom, they however contributed as they paved way for the growing of the successful web companies of today (like our all-powerful Google). This undoubtedly may emerge for the blockchain tech and the Bitcoin market. And with economies now starting to adopt and legitimize Cryptocurrencies (in unison with network results for group-forming networks) and its subsequent wide application in numerous sectors, the $5trillion market capitalization of the dotcom bubble may be reasonably unimportant. This (widespread adoption) however, will also have a cause and effect on adjacent economies, speeding up new and vibrant clusters of ingenious service models/startups (like the non-custodial Changelly), brand-new career courses (like blockchain miners, DLT farmers, crypto analyst, and journalists, etc) in addition to job production chances that go beyond the boundaries of the markets and sectors where it originally developed.

Coupling all these prospects to the innately hardcoded distributed nature of the procedure including both the halvening cycle, its singularity home, and unconfisticatable nature, we can securely conclude and confidently posit that Bitcoin’s future is one that is quite luminescent and topographically appealing.

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