Nearly a generation ago, the once-vaunted dot-coms of the ‘new economy’ crashed within a short period of time, along with the millionaire dreams of many daring young Silicon Valley startups and the venture capitalists who loved them. Bitcoin may repeat their fate, albeit at a much faster pace.
Morgan Stanley has likened the current market position of Bitcoin to the dot-com boom and its subsequent collapse, saying that in their most “exuberant,” epoch dot-coms skyrocketed by 250 to 280 percent, according to research published by the firm on Monday. Sheena Shah, a strategist with the Wall Street investment banking giant, remarked that Bitcoin has already outperformed the turn-of-the-century craze 15 times over.
Bitcoin has already seen a number of highs and lows, demonstrating the sheer volatility of the virtual segment, similarly to the dot-com boom of the late 90s. To date, as many as four bear markets have hit Bitcoin, which has plunged about 45 to 50 percent every time. Ms Shah has drawn parallels to the five declines of the dot-com bubble, which deflated several times before finally bursting.
She continued: “The Nasdaq’s bear market from 2000 had five price declines, averaging a surprisingly similar amount of 44 percent.”
“The follow-up rally for both bitcoin and the Nasdaq always saw falling trading volumes,” Shah warned.
Interestingly, she saw a correlation between an increase in trading and investors’ rush to get out of the segment. The analysis carried out by the financial giant couldn’t but cause worry among cryptocurrency investors, who have increasingly opted for inter-currency exchanges. For instance, a wider use of Tether tokens marks a notable shift from the conventional US dollar, or China’s yuan and Japanese yen used in similar operations.
“Over the coming years, we think that market focus could turn increasingly towards cross trades between cryptocurrencies/tokens, which would transact via distributed ledgers only and not via the banking system,” the financier concluded.
According to the latest data, Bitcoin first lost in value following US tech titan Google’s decision to ban virtual currency ads, then went up a little bit and is now worth $8,593.84.
Last week, Google announced it would eliminate advertising related to cryptocurrencies and related products across all its ad platforms starting in June in an attempt to guard “the ads ecosystem.”