Crypto Bubble Projected To Be Five Times Larger Than The Dotcom Bubble
Messari founder and CEO Ryan Selkis made an interesting observation over the weekend while looking at the maximum chart of the Nasdaq composite index. He claimed that the upcoming crypto bubble would be five times larger than the dotcom bubble. Sounds scary and negative but it is not necessarily.
In fact, the longtime crypto analyst stated:
I’ve been staring at this chart, and thinking two things:
1) The “big” crypto bubble will be ~5x larger than the dotcom bubble. ($30 trillion vs. $6 trillion)
2) If Bitcoin matches gold market cap that would still leaves a 20x for the rest of crypto. The kindling is there
I've been staring at this chart, and thinking two things:— Ryan Selkis (@twobitidiot) September 12, 2021
1) The "big" crypto bubble will be ~5x larger than the dotcom bubble. ($30 trillion vs. $6 trillion)
2) If Bitcoin matches gold market cap that would still leaves a 20x for the rest of crypto.
The kindling is there. 🤷♂️ pic.twitter.com/B9vnO0iWec
Note that I did say *bubble* here. I don’t think this is reasonable, or good for us. Would be better to grow more methodically over time as the tech is derisked.
There’s a lot to unpack there, so let’s get to it.
Rise and fall
First off, it is clear that the 2017-2018 Bitcoin bull run and subsequent crash was a bubble in hindsight, one which by now seems normal for the course of Bitcoin. Even the rise to $8,000 and subsequent fall to $4,000 in March of 2020 (when Covid hit the western world for the first time) was part of a normal cycle of bubbles and falls for crypto.
However, in the long term, crypto does keep rising, so there is a case to be made for it to experience further bubbles in the future (certainly given the fact that the crypto market does not have built-in circuit breakers like stock markets do).
Secondly, when you look at the Nasdaq chart from the beginning (in 1981) until now, you see a clear spike and subsequent fall in the 2000 era. That is what’s known as the dotcom bubble. Back then, share prices of internet companies (which were brand new) increased much faster and higher than their peers in the real sector as people experienced FOMO (or the fear of missing out) and bought into AOL and Pets.com.
As always in such cases, it ended in tears with the bursting of the bubble. This caused market panic through massive sell-offs of dotcom company stocks, driving their values further down, and by 2002, investor losses were estimated at around $6 trillion (Microstrategy was at the time one of the biggest losers), which explains Ryan’s figure.
If however he foresees that the crypto bubble would only start when the value of crypto assets as a whole would reach $20 trillion, we still got some time to go, and that also means he foresees there’s still a long way to ride up before we get there.
The current price of Bitcoin times five would also mean that before we hit $200k, it’s not yet time to panic.