Since the beginning of time (for Blockchain and crypto enthusiasts, the beginning of time is the 3rd of January, 2009 when Satoshi Nakamoto helped the Bitcoin Network come into existence by mining the genesis block of Bitcoin – block number zero) many media outlets and personalities have called Bitcoin and cryptocurrencies in general a bubble. Most of the blabber have been whimsical and capricious and without any deep insight but merely based on frivolous reasoning and wishful thinking. They have gone further to liken it to the dotcom bubble, but these two are not as similar as the tabloids portend.
Difference No. 1;
The Dot com bubble came about primarily due to institutional investors pulling out of Internet-based stocks.
Inversely, the amount of monies by institutional investors into cryptocurrency is negligible. At the moment, most crypto holders are individuals who believe in the economy that has been created by a growing global grassroot of believers.
Difference No. 2;
Despite the cacophony of voices-of-ridicule about the dot come bubble, it has not stopped the internet from being successful and permeating every aspect of our lives as well as our daily activities. This means that a bubble in itself might not necessarily a bad thing, but a process in the journey that defines a remarkable and paradigm shifting product. The Amzon.com growth chart below is a testament of this. In fact, there has been a great amount of institutional monies re-invested in internet-based products since after the bubble-phase has been over.
It is also safe to say that institutional investors have learned some hard lessons from the dotcom bubble and are less likely to make the same mistakes with the cryptocurrency market. This has been made manifest in the sense that majority of institutional funds that have been pumped into crypto thus far have done so with some much-needed precautions and these funds have realized some profitable returns.
The prices of cryptocurrencies will remain quite volatile for some years to come as adoption is still ongoing and we are far from a saturation point where stability begins to set-in. But then again, what is the fun in having a stable and boring market? In the midst of the volatility and nay sayings, the wise have been profiting – they make sure to do their own in-depth research and make the sacrifice of truly understanding the market within which they play.