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:
Crypto Assets Market Cap (per Coinmarketcap.com):
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. True, we are only a month in but have in mind that there are 10 times more retail investors now than there were in the 1999-2000 era. So, 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 valuation 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 as I hope this can help the community have perspectives on the current situation. I'm glad that the market seems to have picked up but we need to have history in mind whereas there will always be winners and losers.
DISCLAIMER: The information discussed here is intended to enable the community to know my opinions and discuss them. It is not intended as and does not constitute investment advice or legal or tax advice or an offer to sell any asset to any person or a solicitation of any person of any offer to purchase any asset. The information here should not be construed as any endorsement, recommendation or sponsorship of any company or asset by me. There are inherent risks in relying on, using or retrieving any information found here, and I urge you to make sure you understand these risks before relying on, using or retrieving any information here. You should evaluate the information made available here, and you should seek the advice of professionals, as appropriate, to evaluate any opinion, advice, product, service or other information. I do not guarantee the suitability or potential value of any particular investment or information source. I may invest or otherwise hold an interest in these assets that may be discussed here.