Is Bitcoin like the Dot.com bubble?

As part of the bitcoin bubble meme, parallels are often drawn to the dot.com boom and bust. A nice discussion about the similarities and differences is available here

However let’s explore the prospect of cryptos following the dot.com path. At its peak, in today’s money, the peak of the dot.com market cap was $10T USD around 2000. With crypto market cap in the range of 0.5-0.6T, looks like cryptos still have 15-16x gains ahead. As this type of gain in bitcoin was experienced in 2017, then another such gain implies the peak near the end of 2018. Interestingly the dot.com crash was 75% devaluation which applied to cryptos would mean post-crash we would only go back to 3x of we are at the end 2017. Can’t lose from this point with either HODL or decent trading.

Crypto markets are in a different world

More Demand:

• Global population is 22% more than in year 2000.
• Cryptos are a global market and institutions are not yet in force as the asset class is still new. In 2000, the dot.com markets were NASDAQ participants and 50% of the investors were institutions.
• There is 6x more US money than in 2000.
• The wealth of other major nations, in particular BRICS, has greatly increased.

Macro Economic Outlook favours alternatives like Bitcoin:

• The US economy was much better leading up to 2000 with the real US GDP growing well (~ 4%) compared to current relatively anaemic growth below 3%.
• Leading into 2000, Gold had been declining significantly for years as its risk ‘hedging’ was not needed. Today, gold is holding and rising slowly even against manipulation.
• In 2000, the investment environment was more competitive with higher interest rates allowing for risk pricing. Today most alternative investments to crypto have low yields and low growth potential.

Social Drivers:

• Post GFC and consequential global malaise is raising the air of revolution and cryptos are egalitarian and anti-establishment.
• Demographics: a large cohort of young millennials are more technically engaged with an increasing preference to the new digital money opportunities.
• Cryptos are seen as the next wave of technical evolution so their network is growing with users who are driving the crypto asset market and forming the market for crypto services. Dot.coms were companies still planning to build markets.

While simply following dot.com would provide 15x gain, a crash and back to 3x gain over 2018, the reality of the global context is there is much more fuel and energy surrounding the cryptos to drive bigger gains over a longer time. The growth will be one for the ages.