Cryptocurrency has led to a colossal change in the financial world. It is an umbrella term used for all the digital platforms that work in the cryptographic framework and security features. These currencies have no physical presence but only a digital value.



The nascency of cryptocurrencies with the unprecedented rise in its popularity had a market capitalization of $42 billion in July 2016. These currencies are a trivial fraction of all digital platforms but have experienced an exponential growth.



In the recent years, cryptocurrency has led to an emergence of a new speculative behavior with a sudden influx of people calling themselves as crypto-traders and crypto-experts. Over the years, society has been split into two polarised personalities, one that is infatuated by its idea and others that consider it as another bubble.



Similarities between Dotcom Bubble of 1990’s and Cryptocurrency Bubble



There has been a debate on the similarities between the dot-com bubble of the 1990’s and the rise in cryptocurrency. A tech enthusiast, Ritvik Vasudevan, used data to define these similarities. Data on an aggregate of 600+ internet company stocks throughout the dot-com bubble and scraped bitcoin prices since 2013 was used as it represents trend and growth in both the markets.



Dynamic Time Warping technique was employed to validate the resemblance. After regress cleaning and scaling of data, it was plotted against a perfect alignment linear path. Using a statistical measure, R2, F test and standard error of the regression verified the resemblance between the dot-com bubble and cryptocurrency bubble.



Why are they different?



Many investors, especially those who haven’t made any huge gains, believe that cryptocurrency is a bubble which will soon reach its maximum value and burst. Many business houses in the Dotcom bubble used investor’s funds to build private property and throw lavish parties instead of focusing on their business models.



Boo.com founder Ernst Malmsten claimed that his luxurious jet was “too cramped” and 18 months later this company went bankrupt and lost $135 million. On the other hand, it is known that the crypto leaders are known to use most of their money in business development and its promotion.



Dotcom bubble forced many promising students to leave school and take up work. Most of the people left their jobs and became full-time traders before the dot-com bubble burst. But not many people plan to give up their jobs to pursue crypto. They are not monetarily dependent on these virtual currencies.



A lot of money in the dot-com era was invested by venture capitalists and accredited investors which is in complete contrast to the cryptocurrency market. Most of the investors see cryptocurrency as a money-making opportunity and has become very popular among a large number of investors. Dotcom businesses were majorly spread in the United States. One saving grace is that many crypto traders were investors during the dot-com bubble and have chosen to take lessons from their past experience.



Conclusion



There was around $3 trillion in the game when the dot-com bubble burst but cryptocurrency is still in its nascent stage. Many investors are speculating that it is the largest financial bubble that could decimate the financial market. Though many also consider it as the biggest tech revolution that can transform the way we invest, send money and conduct business.



Let us know your thoughts about these bubbles in the comments below!! Stay tuned to CoinTopper.com



