The Stunning Parallels Between Bitcoin and Other Successful Asset Classes

The comparatively recent advent of Bitcoin and blockchain technology makes it feel unique, and in many ways cryptocurrencies are unlike any other asset class. And yet, a look back through the lens of history will reveal that we’ve seen these patterns before; moreover, the parallels between Bitcoin and other investable assets can help us to determine where crypto prices might be headed.

First, let us begin with a chart that should be familiar to any longtime Bitcoin investor: the historical price chart that runs from the early years to now:

Courtesy of coindesk.com

It’s easy to look at this chart and call Bitcoin a “bubble,” “blow-off top,” or any number of derogatory terms. What we need to understand, however, is that chart interpretation is in the eye of the beholder: there’s nothing in the data itself that carries the label of “bubble” or any other construal of what’s happening with Bitcoin.

Nonetheless, crypto critics are fond of comparing Bitcoin to the dot-com boom and bust of the late 1990s and early 2000s. It’s a tempting comparison because the Internet revolution was technology-based, much like the Bitcoin revolution is today. And indeed, there is some overlap between the price action of the Nasdaq 100 during that era and Bitcoin’s price history:

Courtesy of macrotrends.net

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Fine, then: let’s let the comparison stand (though there are major differences between the two situations, but we can let that slide for argument’s sake). But if we’re going to allow the comparison to stand, then we should carry it out to its full conclusion. And the conclusion of the dot-com revolution was life-changing technology that continues to inform just about every aspect of modern society.

Indeed, for patient investors, carefully selected tech stocks emerged from the dot-com era and become today’s superstars, while the Nasdaq itself reclaimed its losses and a whole lot more:

Courtesy of macrotrends.net

Thus, those who would compare Bitcoin to the dot-com era are really only lending support to the idea that cryptocurrencies are here to stay and that Bitcoin will reward investors who are will to accept that newer asset classes will experience bumps in the road. In that regard, Bitcoin is a lot more like the dot-com revolution than, say, tulips or Beanie Babies.

Another common comparison has been made between Bitcoin and gold, with some commentators calling Bitcoin “digital gold.” That’s fodder for a whole other discussion, but a historical look back does reveal a striking resemblance between one of gold’s bear markets and Bitcoin’s behavior today:

Courtesy of macrotrends.net

There’s no denying that this chart looks an awful lot like the Bitcoin chart – with a little bit of scaling, one could almost superimpose them on top of each other. Actually, we didn’t have to use gold: silver, platinum, or palladium would have yielded a similar price chart representing this time frame.

But if we focus on gold, it’s not hard to imagine how unstable the yellow metal must have felt in 1980, with its low at $474 and its high at $850. It must have felt like… well, like Bitcoin felt during the last couple of years.

Of course, we can now look back and see that gold survived the volatility and ascended to $1,900 per ounce in September of 2011. Like all other asset classes, gold shook out the weak hands, and that’s what Bitcoin is doing in 2018. Markets will rise and markets will fall: the powers that be love to “shake the tree” to see who really has what it takes to survive in the investing game.

If you’re an investor in cryptocurrencies (or any other asset class, for that matter), you don’t have to get shaken out. Instead, you can take heart in history’s lessons to the wise: the Internet is still here, and so is gold. And while past performance isn’t necessarily indicative of the future, I for one am ready to bear witness as Bitcoin becomes history’s next success story.