the word ‘cryptocurrency’ or ‘bitcoin,’ there is a solid chance that within the same paragraph or even sentence the word ‘bubble’ could also be found. Bubble has indeed become a shibboleth for crypto sceptics, especially after the market soared at the end of 2017, and the widening gap between valuation and intrinsic value of digital currencies and tokens became ostensible to many.
Yet not all bubbles are created equal: some bubble-framed references and (physical things that refer to ideas or emotions) tend to surface more often in media space than others. Maybe the crypto's most easily seen historical comparison is the dot-com bubble of the early 2000-s - and quite understandably so. There is almost (so extremely attractive, sweet, etc., that you cannot resist) (something that makes you want to do something/the feeling of wanting to do something) to draw similar things between the burst of the booming market that came out/became visible around early applications of a disruptive communication technology, and the highly dangerous and unstable market that came out/became visible around the blockchain community.
The recent slump in crypto prices has only made face (things that are almost the same as other things) more obvious. As Bloomberg reported earlier this week, VanEck's MVIS CryptoCompare Digital Valuable things 10 Index, which tracks the prices of top ten digital valuable things, went down 80 percent compared to its January high. (in a way where one thing represents something else), this development is now more dramatic than the Nasdaq (thing made up of different things) Index's 78 percent nosedive at the height of the dot-com crash. The overall market cap dipped below $200 billion, shrinking by a factor of more than three from the (taking into account all of history) high. Does this mean that crypto market is doomed to follow the pattern of the early internet boom's famous (for something bad) explosion?
In the simplest terms, market bubbles happen when valuable things are traded at prices that by far go beyond their basic value. Even though this can happen in almost every market, tech businesses, widely interpreted, are especially likely to experience/likely to get such patterns (of relationships, movement, or sound). Maybe this is due to the human habit/desire to get excited over possibly disruptive technologies and then start/work at based on guessing/guessed behavior fueled by this excitement. The technology in question does not necessarily have to be a digital one - the British 'railway mania' of the mid-19th century could serve as a good example of an 'analog' bubble.
The mid to late 1990s saw the fast growth of internet-powered person (who uses a product or service) markets. Sensing the 'next big thing,' small business starters and (people or businesses who give money to help start businesses) moved (in large numbers) into the space, inflating each other's love along with (figuring out the amount of money something is worth) of internet startups, which grew energetically in the (time when stock prices are rising). At the time, adding .com to a company's name did the same to its stock as adding 'blockchain' does today. The Nasdaq (thing made up of different things) stock market index was the one that watched and followed many of those technology companies, and it was doing great - until a certain moment. At its peak in March 2000, the index reached the value of $6 trillion. A few years before, then-Chairman of the Fed Alan Greenspan in a very well-known way watched/followed that 'irrational extreme excitedness' tends to 'unduly increase valuable thing values.' Once the dot-com (something that attracts lots of people) headed steeply downhill, the term 'irrational extreme excitedness' entered just about every (related to careful studying or deep thinking) reflection on what has happened.
The bubble burst. Expectations were set too high, the market was too overheated, and many of the dotcoms proved unable to come up with (able to last/helping the planet) business models, let alone deliver services worth anything almost the same as what (people or businesses who give money to help start businesses) poured on them. In less than two years, more than half of the companies folded, while trillions of dollars of (people or businesses who give money to help start businesses)' money just disappeared. As the (existing all over a large area) story goes, the explosion of the dot-com bubble helped weed out many (grabs at any easy opportunity) players, this way clearing the way for those serious companies that had real ideas and a truly (able to see the future/a person who can see the future) vision - today's giants like Amazon and Apple usually among the first (or most important) examples. Ethereum co-person (who started a company) Joseph Lubin in a very well-known way showed/described these events as 'creative destruction' and, along with many others, pointed out that the crypto market might be following the same arc-like path.
In fact, the dot-com bubble and the possible crypto bubble share many striking (things in common), from powerful waves of weird (because of wrong thinking) extreme excitedness fueling their (able to explode/very emotional) growth to huge and fancy disruptive promise of their hidden (under) technologies to (move in a particular way/become popular) lines describing the patterns (of relationships, movement, or sound) of their capitalization. As per Morgan Stanley's March report, cryptocurrency price chart is broadly mirroring the Nasdaq index chart from the turn of the century; the number of bear cycles and rebounds, as well as their depth, are mostly almost the same, as are the regularities in trading amounts/quantities. Some other very smart people have independently reached almost the same ends/end results by using fancy (related to studying numbers) ways of doing things to compare those two sets of data points. So, is it warranted that the painful burst is what always waits for us all? Or has it already happened in January, meaning that we are now living through the sad/dark days of decay the same as the dot-com after-wreck 2001? The unsatisfying answer is that we cannot know for sure.
One thing to remember is some important features that are still different between the two sets of facts or conditions (that surround someone). The most obvious one to look at is the size of the market, even though the relevance of this metric is not known for sure: whereas the Nasdaq (thing made up of different things) index amounted to six trillion dollars on its brightest day, the crypto market's high-water mark is around half a trillion. At least we can be sure that the damage to the overall (process of people making, selling, and buying things) in the case of collapse would be less dramatic than eighteen years ago.
A more resulting (number or thing that changes) might be the pace at which the markets move. According to the same analysis by Morgan Stanley, in blockchain industry things happen 15 times faster than in the early internet part/area. This is a product of some important differences between the two cases. One is that thanks to Twitter, Reddit, and Telegram, the information (surrounding conditions) around crypto markets is richer, more clear/open and honest and more (able to reply or react/quick to respond) to (clearly connected or related) (and not-so-(clearly connected or related), for that matter) signals. Another point is that, unlike dot-com startups that were mainly supported by (money to small business) flowing from institutional actors, crypto markets depend on millions of retail (people or businesses who give money to help start businesses) around the world a good deal. In sum, the 'crypto bubble' is a more (many different kinds of people or things) group of actors who have a large number of information about the market, which is (many people would say) more distributed (related to where mountains, rivers, cities, etc., are located) than any other. This looks like a set of (related to what holds something together and makes it strong) differences that could produce results that are different from what the story of dot-coms would (describe a possible future event).
In his thoughtful analysis published on Computer criminal Noon during the first downward tide of the year, Noam Levenson argues that the digital valuable thing market has not yet reached the levels of adoption and capitalization needed for a proper 'popping.' More than that, the dot-com-like crash might not even happen at all, and instead crypto markets would just bounce between bear and bull cycles until (existing all over a large area) adoption helps them dig in/establish in a less dangerous and unstable (land area owned or controlled by someone). The point is, we might well be past the crash, or simply in another loop of (time when stock prices are falling) on our way to the new heights. It is impossible to strongly defend/strongly express one or another with confidence, since there is only so much that can be learned and predicted (numbers, based on what's known) from the dot-com case - a case that is somewhat almost the same but not identical to the current state of the crypto market.
(in the end), whether digital valuable things are a bubble or not is no more than a debate over words/word choices. Even within the crypto community, it is clear to the majority that the present-day able to be touched/real output that blockchain-based trips/businesses can offer falls far behind the figures watched/followed at the home page of coinmarketcap.com. It is also clear that these two values will have to (match things up in a line again/cause to agree again) at some point, almost the same as how it eventually unfolded with internet companies. The right questions to ask are what the timeline will be, and what the resultant setup of the industry will look like; what share of today's players will survive and which ones will eventually make it to the status of Amazons and Googles of the blockchain businesses of the future; whether the industry will progress through a terrible and destructive crash or a (compared to other things) soft landing.
According to a radical viewpoint, nearly every market is a bubble, and a market's (development or increase over time/series of events or things) is just a sequence of inflations and pops. The general feeling among crypto (people who are interested in a project or business) seems to be that the price drop is (certain to happen) at some point, and many of the less doable/possible projects will have to go. Further still, even the stock market rushed craziness around possibly disruptive technologies might be viewed as an unlikely means of completing a greater good, opening up the floodgates of capital for businesses would otherwise seem too novel and risky: "Nothing important has ever been built without weird (because of wrong thinking) extreme excitedness."