Blast From the Past: Bitcoin Price Decline Bears Strong Resemblance to the Nasdaq Crash of 2000
Originally published on: Blast From the Past: Bitcoin Price Decline Bears Strong Resemblance to the Nasdaq Crash of 2000
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March 21, 2018
It was the year 2000 and many “tech startups” were issuing IPOs as part of the burgeoning dot-com era. These companies were all rushing to go public, promising many paradigm-shifting service delivery protocols that would challenge traditional brick-and-mortar establishments. Investors likewise rushed to the market, eager to get in on the action and make huge profits. The bubble would eventually burst with many startups going out of business and investors losing most of their investments. Less than two decades on from that era-defining moment in the business scene, another bubble appears to be forming and some experts believe that it has all makings of the dot-com predecessor.
Bitcoin is Like the Dot-com Bubble But on Steroids
According to Morgan Stanley, the bitcoin “boom and bust” cycle appears to bear a lot of similarities to the dot-com bubble. This conclusion is predicated on what appears to be a similar pattern between the behavior of the Nasdaq Composite Index and the bitcoin price. Taking March 2000 and December 2017 as reference points, Morgan Stanley has been able to offer up a basis for comparison between the two eras.
In the lead up to March 2000, which was the peak of the dot-com boom, the Nasdaq rose by 278 percent in 519 days. In the case of bitcoin, its price rose by 248 percent in 35 days, culminating in the $19,511, the highest bitcoin price ever recorded. The rapid surge in the price shows that the bitcoin bubble if it is indeed a bubble, is like the dot-com bubble but a lot more aggressive.
Bitcoin Versus Nasdaq: Bear Market Run
The bear market runs in both era appear to have some similarities as well. The Nasdaq bear market had an average market rally of about 40 percent. For bitcoin, the value is about 43 percent. Regarding price decline after the initial fall, the Nasdaq had a succession of 5 price declines which averaged about 44 percent. Since its December 2017 peak, there have been three different significant bitcoin price drops that have been in the region of 45 percent to 50 percent.
Bitcoin: Another Bubble?
The jury is still out on whether bitcoin is indeed a bubble. Aggressive bear markets rallies are quite ubiquitous in the bitcoin market. As the oldest cryptocurrency, bitcoin provides a lot more information on the crypto market than other cryptocurrencies. Since 2009, there have been a total of four bear market rallies in the bitcoin market which has seen the price of bitcoin decline by between 29 percent and 92 percent. In February of 2018, the price of bitcoin fell to below $6,000, a 70 percent drop from the almost $20,000 price mark set in early December 2018.
According to Sheena Shah, a strategist working with Morgan Stanley, there is not even enough information to make any definitive prediction concerning the bitcoin market. A number of analysts have predicted another round of price boom while some others say that bitcoin prices will continue to tank.