The cryptocurrency’s market cap has recently recovered and regained the $2 trillion mark. However, one analyst believes bears can still enter the market as there are some similarities between the 2000 dot-com bubble and the current crypto market.
Recent studies show that the cryptocurrency adoption curve is similar to internet adoption around 1993, suggesting that a super tipping point is about to happen as cryptocurrencies and related technologies become a commonly used tool in everyday life. This can cause demand to increase and the value to increase as well.
The dot-com bubble “was a rapid rise in the valuation of US technology stocks, fueled by investments in internet-based companies in the late 1990s”. Nasdaq grew fivefold between 1995 and 2000, but then fell to a loss of nearly 77% on October 4, 2002.
“Even blue chip technology stocks like Cisco, Intel, Oracle lost more than 80% of their value. It will be 15 years before Nasdaq returns to the top, which it did on April 24, 2015.”
Analyst Tasha Che has divide Artikel said that the cryptocurrency is likely to enter an extended bear market, with a decline similar to that seen on the Nasdaq in the 2000s.
Cryptocurrency Ownership Statistics | Source: GWI
Total Crypto Market Cap | Source: TradingView
The expert further notes that the Nasdaq is down 80% in two years, which is a boon for the internet industry as it helps eliminate the opportunists so builders can actually build and grow.
This opinion does not mean that the bear market will come immediately as history will not repeat itself in exactly the same way, but with a similar setup, this scenario could happen in the near future, Chen said. The missing element is a recession spike pattern, which is defined as “a sudden surge in price and volume followed by a sharp decline in price on high volume.”
Should the recession peak over the next few months and the total market cap jump to $3 trillion, Chen believes history will almost certainly repeat itself.
However, other users pointed out that Chen’s data does not take into account the nearly 5-fold increase in the currency’s M2 supply over the past 20 years, from $4.6 trillion in 2000 to $18.45 trillion increased in 2020.
Another user notice The two markets may not be emotionally correlated since internet speculation over-inflated the market in 2000, but crypto speculation can now be viewed as a “parallel liquid market.”
It also turns out that cryptocurrencies are a different case as assets are more reflective. An increase in usage could be reflected in the price, and an increase in price could help increase user adoption of the cryptocurrency. However, the dot-com bubble hasn’t slowed internet usage because “people don’t have to buy AMZN stock to use Amazon.”
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