Is crypto the new dot-com bubble?

The ongoing recession (moderation?) of the cryptocurrency marketcap is currently in high gear. We thought that this would be the best time for us to speak about the future of not only our project, but cryptocurrencies in general.

As we all know, history tends to repeat itself, so the best possible way to make evaluations regarding the future of something, is to look for something similar in the past.

Let’s do just that, shall we?

So, what we are looking for is an era or event, similar to the crypto phenomenon, where some new technology emerged, pretty much unbeknown to the general public. The first and as it turns out the best possible example of that is of course, the Internet.

This fits our criteria and might be considered by some as almost a carbon copy of the current situation with cryptocurrencies.

Let’s digress for a second and imagine that you live in United States, in the year of 1995. The Mosaic web browser, which revolutionized the way people used the Internet has been on the market for 2 years, since 1993, but the hypothetical American still does not have any sort of Internet connection.

And then, suddenly, you hear a knock on the door. You open the door and see a representative from America Online (AOL), an Internet evangelist type. Let’s imagine how that hypothetical conversation would go back in the year of 1995:

-Greetings, sir! Do you have a moment to talk about the Internet?
-Sure, I do. I’ve heard something about it on the telly, but I don’t really know what it's all about.
-Worry not, sir! The Internet is a global system of interconnected computer networks that use the Internet protocol suite to link devices worldwide. Do you have a personal computer?
-Yes, I do. But this description sounds like mumbo jumbo. What exactly can I do with the help of this so-called Internet?
-That’s a great question, sir! Well, you can read books, check the weather online as well as read the news.
-That is neat, but I already have an option to do so, without the help of the Internet. Thank you.

The point of this hypothetical conversation is that it is extremely hard to sell the technology without the product. Amazon, Ebay, Youtube and other websites played a vast role in the global adoption of the Internet.

The same logic applies to blockchain. We all understand that the technology of blockchain and smart contracts might change and shape the world in the same way as the Internet did. But to this day, the idea of blockchain is very hard to sell to an average Joe, without the blockchain equivalents of the aforementioned Youtube and Google. Blockchain is still severely lacking a “system-seller”.

What does it have to do with dot-com bubble?

First off, we need to understand what this bubble actually means. As Wikipedia defines it, it was an historic economic bubble and period of excessive speculation that occurred roughly from 1997 to 2001, a period of extreme growth in the usage and adaptation of the Internet. Any new technology stimulates an emergence of huge numbers of new-born companies, striving to take their share of the freshly baked pie. The Internet was absolutely no exception.

The dotcom bubble grew out of a combination of the presence of speculative or fad-based investing, the abundance of venture capital funding for startups and the failure of dotcoms to turn a profit. Investors poured money into Internet startups during the 1990s in the hope that those companies would one day become profitable on top of this many investors and venture capitalists abandoned a cautious approach for fear of not being able to cash in on the growing use of the Internet.

This bubble was fed by cheap money, easy capital, market overconfidence and pure speculation. Investors anxious to find the next big score eagerly invested in any company with a “.com” after its name. Sounds very familiar, doesn’t it?

Unpleasant parallels

An unprecedented amount of personal investing occurred during the boom and stories of people quitting their jobs to engage in full-time day trading were common. At the height of the boom, it was possible for a promising dot-com company to become a public company via an IPO and raise a substantial amount of money even if it had never made a profit—or, in some cases, realized any material revenue.

Most of these companies spent excessive amounts of funds to build market share as fast as possible, under the mindset of “get big fast”, “get large or get lost”, or, as a rapper 50Cent famously put it: “get rich or die tryin’”.

During the Superbowl of 2000, there were 16 (sic!) dot-com companies, that had their commercials run during the halftime show.

Again, all of it sounds very similar to the current crypto conjuncture. IPOs were replaced with ICOs and most of the crypto companies still share the failed mottos of “let’s do marketing first, product second”. As a result of such an approach, as well as the overall lack of regulation, we now have millions of investors in the industry, who’ve lost their funds, trying to hop on the blockchain hype train.

Gloomy (?) results

As a result of the bubble bursting, many dot-com companies ran out of capital and went through liquidation. On Friday, April 14, 2000, the Nasdaq Composite index fell 9%, ending a week in which it fell 25%. The general attitude towards the tech and dot-com companies was spoiled beyond repair. Many investors suffered huge losses, and lots of people lost their jobs. The Super Bowl halftime show (a great measuring tool, as it turns out) featured only 3 dot-com companies, 5 times less than the year prior to that.

So what happened? Did the free market defeat all of the Internet companies? Did the burden of the dot-com bubble prevent new tech companies from emerging? Did everyone lose?

Simply check out the current Fortune 500 companies and you will find out, that this is far from being true. The events of early 2000s weeded out the companies that were destined to fail. In the general sense, the dot-com bubble turned out an extremely healthy event for the whole tech industry.

Just take a look at the companies that failed (pets.com, chemdex.com, Webvan), and the companies that lived through the bubble (Adobe, Amazon, Ebay). And yes, there is no denial, that it took years for the companies that survived the bubble to recover to their ATH values, but it all boils down to several things - the competence of the team and the fundamental value of the company. If the project is fundamentally strong and if the team has an idea of what they are doing, no bubble will be able to stop such a force.

Cryptocurrencies are a global phenomenon and yet are currently only worth $300 billion . In comparison to $3-5 trillion marketcap of the dot-com era, the crypto bubble has a lot of room left to inflate.

Most likely the cryptocurrency industry will face major changes in the upcoming years. An introduction of crypto regulation might be the biggest cleansing the crypto community has ever seen, but as history has shown us, this would only pave the way for a better and brighter future for crypto on the whole.

Investment in assets can turn out to be quite a misfortune, if you don’t really know what you’re doing. Thousands of people each year lose their hard-earned cash in a desperate attempt to gain profits on trading instruments, that are marketed as extremely easy and simple to master, when in reality it could not be further from the truth.

This is why we are developing Genesis Vision - a platform that provides an open and fair marketplace, bringing together people that want to trade with people who know how to trade, thus putting the funds into the hands of the skilled traders, for the better of everyone involved.

To sum up we would like to share only one piece of advice. Choose wisely, where and when to invest. Thank you for reading and until next time!