What US Tech Stocks Can Teach Us About Cryptocurrencies
|Browse your favorite social media site and there will be tons of people trying to call the bottom in cryptocurrencies.
Are they right?
As enthusiastic as many of these people are, nobody really knows. Anyone who claims to know for sure is just fooling themselves.
However, we can make some very educated guesses as to what could possibly happen next, if we look to similar situations in the past.
Yes, past performance does not guarantee future results.
...but human nature is pretty predicatable over long periods of time.
So let's take a look at what we can learn from the dot com bust of 1999 and how that can give us some clues as to what may happen in Bitcoin and other cryptocurrencies.
The US Tech Stock Bubble
We all know about the tech bubble in the late '90s. But just as a refresher, let's take a look at a chart of the Nasdaq.
Remember that the tech bubble had the following characteristics:
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A new technology/market
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Companies with unproven business models and technology
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Overhyped
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A few companies with real potential to change the world
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A multi-year sideways market before tech stocks lived up to their investment potential
There are actually quite a few correlations between that bubble and the cryptocurrency bubble.
Where Will Cryptocurrencies Go From Here?
For starters, the Bitcoin chart looks very similar to the pre-2004 Nasdaq chart.
Cryptocurrencies also have these characteristics:
- New techology
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Cryptocurrencies for dumb ideas and unproven tech
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Way overhyped
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A few projects that truly have the potential to change the world
Therefore the question becomes, will cryptocurrencies and blockchain technology stick around long enough for it to do something similar to what the Nasdaq did?
I believe that it will.
But based on what we saw in tech stocks, we are probably going to have to ride out a long sideways market before we see any growth again.
Final Thoughts
So ignore the knife-catchers and double-bottom pickers and do your own analysis. Remember that Microsoft went sidewards for about 16 years before it broke out to new highs.
The turnaround in cryptocurrencies like Bitcoin might take just as long.
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