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Crypto's Plunge is Now Worse Than the Dot-Com Crash
FinTech, Blockchain, Financial Services
With apologies to Shakespeare: We come here neither to bury cryptocurrencies, nor to praise them, but to just be brutally honest about how things fare right now with our beloved digital coins.
Alas, things do not fare well at the moment my friends, countrymen and Romans (if you happen to be Roman). We already mentioned how last week was a bad week for cryptocurrencies – and we could have just left it that.
But, unfortunately, we come bearing even worse news this week, which we would be remiss not to report.
For when cryptocurrencies “plumbed new depths” this week, as Bloomberg referred to it, this latest drop meant the MVIS CryptoCompare Digital Assets 10 Index has fallen 80 percent since January. This represents a bigger plunge than the “Nasdaq Composite Index’s 78 percent peak-to-trough decline after the dot-com bubble burst in 2000,” Bloomberg reports.
This, of course, does not mean that cryptocurrencies won’t eventually recover and prove to be a wild success the same way the Internet 2.0 revolution erased all – or at least most – of the bad memories from the dot-com crash. But it’s become clear that the wild days of Bitcoin’s meteoric rise last year when it seemed like anyone could get “hilariously rich” are dead and are not coming back anytime soon.
Like their predecessors during the Internet-stock boom almost two decades ago, cryptocurrency investors who bet big on a seemingly revolutionary technology are suffering a painful reality check, particularly those in many secondary tokens, so-called alt-coins.
“It just shows what a massive, speculative bubble the whole crypto thing was — as many of us at the time warned,” said Neil Wilson, chief market analyst in London for Markets.com, a foreign-exchange trading platform. “It’s a very likely a winner takes all market — Bitcoin currently most likely.”
This time Ether was largely responsible for dragging the cryptocurrency market down to a 10-month low, falling 11 percent on Monday. The market cap of cryptocurrencies that are tracked by CoinMarketCap.com has fallen as much as $640 billion from its January peak.
Vitalik Buterin, co-founder of Ethereum, seems to be realistic about how much has changed for the cryptocurrency space since the delirious highs of 2017.
“The blockchain space is getting to the point where there’s a ceiling in sight,” Buterin said in a Sept. 8 interview with Bloomberg at the Ethereum Industry Summit conference in Hong Kong. “If you talk to the average educated person at this point, they probably have heard of blockchain at least once. There isn’t an opportunity for yet another 1,000-times growth in anything in the space anymore.”
If investors accept that the opportunities to realize “1,000-times growth” in the crypto space have in fact come and gone, then the new strategy for cryptocurrencies should follow the model of Internet 2.0: After the first wave of dot-com companies imploded from excessive hype, excessive speculation and too often zero fundamentals to back up either, the next generation of innovators began building products that have literally changed our lives. Google is not just a search engine, for instance, but a verb; we d0n’t just search for things on the internet, we Google them.
The obvious next step for cryptocurrencies then is to function as an actual currency in the real world, rather than something that too often seems to function as a symbol of the true believers’ dogmatic views about governments and markets. There will continue to be volatility as they work to become a functional currency. There will be lows that wipe out the highs. But that’s fine. As they’ve often told you, Rome wasn’t built in a day.
Photo: Getty iStock