The adoption of blockchain and cryptocurrency sectors is looking more and more like a repeat of the past adoption of the internet age and dot com bubble.
You often hear about the negative things that happened during the dot com bubble, but there was also a lot of good that came from those mistakes as well.
I’ll cover a handful of the similarities and you can see how I am leveraging this information to build my digital asset portfolio.
Crypto and the Dot-com Bubble are Eerily Similar
And I love it!
Dot-Com/Tech Bubble
(late 1990s early 2000s)
Blockchain/Crypto
(current time ~ 2022)
Social Changes
The dot-com bubble era marked the shift to the Information Age, an economy based on information technology was created, and many new companies were founded.
From 1993-1997, the percentage of households in the United States owning computers increased from 15% to 35%.
An economy based on blockchain has been created. From Gaming, Artwork, Social Clubs, DEFI, and DAOs. Many new companies and DAOs were founded.
In March 2022, CNBC reported that 20% of people in the United States have invested in or used cryptocurrency
Barriers to Entry
The barriers to owning a computer dropped significantly during this time period. It was cheaper, more accessible, and a popular thing to do.
Online brokerages also came into the scene. For the first time, you could participate in the stock market from your personal computer.
Crypto has also lowered its barriers to entry. With level 2 blockchains the price of gas fees has decreased making it cheaper for people to get involved.
Similar to online brokerages in the year 2000 onboarding fiat to cryptocurrency ramps created accessibility to nontechnical people.
Interest Rates
Prior to the dot com bubble interest rates were at a decline and capital was easy to come by. Making it easy to make speculative investments.
In 2000, Alan Greenspan, then Chair of the Federal Reserve, raised interest rates several times; these actions were believed by many to have caused the bursting of the dot-com bubble.
After seeing historically low-interest rates for the last few years.
Fed interest rates are increasing and uncertain.
New Industry Careers
An unprecedented amount of personal investing occurred during the boom and stories of people quitting their jobs to trade on the financial market were common.
Careers in web development was new and highly sought after jobs.
A glance on Twitter and you’ll see people talking about how they are earning passive income or quitting their job to pursue crypto investing full time.
Technical jobs in blockchain are now a new sub-category of development.
Going Main Stream (Super Bowl)
Two dot-com companies purchased ad spots for Super Bowl XXXIII (January 31, 1999), and 17 dot-com companies bought ad spots the following year for Super Bowl XXXIV.
The Coinbase ad during the 2022 Super Bowl crashed servers!
Regulation Uncertainties
On April 3, 2000, judge Thomas Penfield Jackson issued his conclusions of law in the case of United States v. Microsoft Corp. and ruled that Microsoft was guilty of monopolization and tying in violation of the Sherman Antitrust Act.
This led to a one-day 15% decline in the value of shares in Microsoft and a 350-point, or 8%, drop in the value of the Nasdaq. Many people saw legal actions as bad for technology in general.
Legal issues plague crypto with numerous SEC violations and uncertainty of how crypto regulation will play out.
Just as the Microsoft lawsuit was a significant player in the dot-com bust, we see significant fluctuations in not only crypto price but publicly traded companies in the space such as Coinbase (COIN) or Stronghold
Scams/Bankruptcy/Rug Pulls
On November 9, 2000, Pets.com, a much-hyped company raising 82.5 million, went out of business only nine months after completing its IPO.
At that same time, a decline in Internet stocks by about 75% from their highs wiped out $1.755 trillion.
Is Pets.com the equivalent of today’s crypto rug pulls?
Investor Confidence/ Public Sentiment
Investor confidence was further eroded by several accounting scandals and the resulting bankruptcies, including the Enron scandal in October 2001 and the WorldCom scandal in June 2002.
The Wonderland Money scandal had a major trickle-down effect on investments and DEFI projects.
Just as Enron defrauded, the Wonderland Money team had similar issues and also eroded investors’ confidence.
New Forms of Money Transfers
While writing checks or the advent of debit cards was nothing new during this time frame. The changeing of currency and fraud similarities were common.
In 2003, more transactions were paid for by check than by any other method. And there was a ton of fraud. It was common to see the “No Checks Accepted” sign in many retail locations.
Just as bad check writers created fraud writing bank checks. There are arguably just as many scams with the changing type of currency.
