Is Cryptocurrency the New “Dot-com” Bubble?

The Dot-com bubble during early adoption of public internet has become the go-to argument of crypto sceptics. Do they have a point?

The Boom

Everyone who’s dipped their toes into the crypto and blockchain arena has encountered it. The knowing looks between friends and family, the authoritative “be careful, it’s just a bubble”. Doubters love to compare Bitcoin to the dot-com bubble, but often they fail to think it through.

Just as billions are pouring into ICO’s, investors once flocked to anything internet related with open checkbooks. Investors have pumped more into ICO’s in the first half of 2018 than all of 2017 despite the lack of regulatory oversight, and there are no signs of a slow down. There’s no question that the signs all point to a bubble, but the real question is, is this a bad thing?

The New Internet?

With every great step forward in tech, there have been doubters. Personal computers? Who would want one of those enormous machines in their house! The internet? Just a novelty. Scepticism is normal, healthy even, but it does mean that the general public rarely grasps exactly how deeply integrated new technology may be in their daily lives.

The current surge in crypto investment is different from the dot-com boom in one crucial way; the internet. Public internet had not yet reached maturity, and investment opportunities were often found through traditional media. Today there are hundreds of news sites for every niche imaginable, all competing to tell you about the next big thing. According to eToro CEO Yoni Assia, this extensive and far-reaching distribution network has changed the game.

You have something that you’ve never had before, not even in the dotcom bubble: if you have a genius idea now and you put a whitepaper on it and suddenly you have 100,000 millionaires reading it and saying ‘hmm, that’s a really good idea.’ If 1,000 put in $10,000 — which is not a lot of money for those 100,000 — you just raised $10 million for your ICO. That scale has never happened before.

Unfortunately, not every idea that attracts funding is going to be a genius idea. As with the Dot-com bubble, many shady ICO’s have little more to offer than an idea and a vague whitepaper. Investors will inevitably lose large amounts of money on dubious projects. While unfortunate for those investors, the projects that remain will be stronger for it.

Bubbles are Relative

While casualties of the dot-com bubble are often touted as a cautionary tale for investors, it’s just as important to remember what remained afterwards. The concepts of digital business and e-commerce didn’t disappear, but websites and businesses that couldn’t support themselves did.

This sort of survival of the fittest scenario is usually a precursor to huge, exponential changes. When we think about the companies that survived the bubble, monsters like Apple, Amazon, Google, we can understand the huge roles they have played in how many of us lead our lives. As such, it would be foolish to not expect at least a few crypto projects to do the same.

In fact, this time around investors and developers have much, much faster and more powerful technology, as well as the bonus of hindsight. Many will crumble, sure, but the ones that remain may change the world.


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