2000: The Dot-Com Bubble

If you were a tech company in 1999, it was almost considered common courtesy to go public. In Zero To One, Paypal founder Peter Thiel recalls:

“One acquaintance told me how he had planned an IPO from his living room before he’d even incorporated his company — and he didn’t think that was weird. In this kind of environment, acting sanely began to seem eccentric.”

Same pattern, bigger numbers. In March 2000, the combined value of all Nasdaq-listed firms was $6.7 trillion. That’s a lot of zeros. Cisco, the most valuable company in the world at the time, had 2,500x-ed its 1990 IPO evaluation, making up 10% of the entire internet market.

Bitcoin first hit $8 in May 2011. At its all-time high around $20,000, it also 2,500x-ed its evaluation, but in seven years, not ten. The return from initial price is even higher. Interesting. However, so far in 2018, the average size of the whole crypto market is about $500 billion. Bitcoin holds 30%-40% of that. And that share has been going down, not up, because BTC is how it all started.

So while we have a few high individual coin evaluations already, the battle for market share has just begun. The hype is here, but the overall size of the bubble is still tiny. We need another 13.4 multiplier, just to get to 2000 highs.

Yes, the circle proportions match.

Besides the market still having plenty of room to blow up (pun intended), in both the dot-com bubble and the current crypto scenario, utility is a big differentiator over the Dutch flowers.

Of course a lot of companies got wiped out, not just for being useless, but also for simply failing. Competition, pricing, innovation, the global economy is an antifragile entity that follows the evolutionary process, and these are real threats, even to the best of players.

Will 95% of cryptos bite the dust? Probably. Will the 5% that remain become Amazons, Googles, and Facebooks? Probably. The reason a lot of both first-time and seasoned investors prefer to start by putting their money into Bitcoin is the Lindy effect. It’s been around the longest, has the biggest network, and a simple architecture, which increases its chances of survival.

A guarantee? No way. But no matter when a bubble pops, something always remains. Even if it’s just ruins.