The Dot Com Bubble Peaked at Three Trillion Dollars
About 17 years ago, CNN published an article titled, "The $1.7 trillion dot.com lesson." It was a recap of everything that went wrong during the dot.com bubble and what lessons were learned. I couldn't help but notice so many parallels to the cryptocurrency markets.
The combined market values of the 280 stocks had fallen to $1.193 trillion currently from $2.948 trillion at their peak, a loss of $1.755 trillion, most of which occurred between March and September of this year.
Today (8/18/17), Coin Market Cap has the total network value of cryptocurrency at ~$144B. This is a long way from the nearly $3 trillion peak that the dot.com bubble hit. It was much easier for the lay person to buy stocks in the 90's than it is for people to purchase cryptocurrency today. Additionally, issues such as storing private keys and the volatility of the asset class means many people are still staying on the sidelines. When the hot dog vendor in Manhattan tells me he has a tip on a token, then I'll be worried about the bubble popping.
Of the 280 stocks in the index, 79 are down 90 percent or more from their 52-week high. Another 72 are down 80-89 percent. Only five are down less than 5 percent.
When the bubble does pop for cryptocurrency, I see many tokens going to 0. I wouldn't be surprised if there are ~1500 tokens on the market right now. Of those on the market, I could see 10% actually surviving. One of the biggest differences between tokens and companies that IPOed during the bubble was that there was at least some barrier to entry to IPO. There is a very little barrier to entry to create a token. There is a token called Useless Ethereum Token. It does literally nothing but is worth ~$130K. Of course, is it really liquid? It exemplifies the concept that literally anyone can create a token. Few tokens are truly useful. The problem is that people are using tokens for fundraising when it's a product feature to help bootstrap a network.
The collapse of the Internet bubble, perhaps one of the largest financial fiascoes in U.S. history, came after a three-year period, starting in January 1997, when investors would buy almost anything even vaguely associated with the Internet, regardless of valuation.
I don't think things are this bad yet for crypto markets, but when you mention you are doing a token sale, suddenly you can raise a million dollars. In 1999, the average IPO was raising $83M and the total amount raised was $24B. This is ways away from the average token sale raise. According to Smith + Crown, the average raise is $2MM (The data is a bit out of date, but I don't think the average raise has gone up exponentially since the data was released). I am reminded of this Silicon Valley clip (video below) when Erlich mentions VR and suddenly everyone wants to invest. I think it's a bit unfair for me to compare token sales to IPO because the logistics of both are quite different, but it's still an interesting data point nonetheless.
Read An overview of the best Cryptocurrency exchanges for the best places to buy and sell Bitcoin