2022 Was Crypto’s Dot Com Bust: Let’s Recap Tech Stocks After 2000 (Opinion)
The last year saw the fall of the Terra-Luna ecosystem, BlockFi, Celsius, Voyager Digital, 3AC, and Alameda-FTX. But it’s not the end of cryptocurrency. Like the Internet after the Dot Com bust, crypto is still just getting started.
Sure, it’s true that several crypto firms went down in 2022. But it seems worse in the headlines than it is in reality. Cryptocurrency’s critics in news journalism and the traditional finance industry are treating the failure stories as representative of the entire industry.
The cryptocurrency community likes to use the term “FUD” to describe the proliferation of negative crypto news. In some ways, that’s natural and understandable in terms of vigilance, transparency, and threat detection.
Fud is an acronym to describe crypto news articles or social media posts that add to perceptions and feelings of fear, uncertainty, and doubt. While the FUD may start arguments on Twitter or YouTube and boost engagement, it rarely informs about recent threats and weaknesses.
Instead, it usually over-discusses them and creates a bias for participants in these discussions to overweigh them in their view of the industry and markets. Besides, all the FUD doesn’t tell anyone about the great products the crypto industry is building.
Crypto Critics Continue to Inspire Doubt
At this point, crypto’s inevitability is hard to hold in doubt for anyone who is apprised of the facts about cryptocurrencies and the latest techniques and products of the global financial market.
Take, for example, this recent story in The Politico about the attitude toward crypto at Davos. It says:
Scaramucci is one of a slew of crypto junkies — executives and staffers from high-profile exchanges, intermediaries and tech companies — who are here in this Swiss ski resort town to try to convince investors and potential backers that, despite the nearly complete collapse of the industry this fall, everything is just fine.”
There is simply no sense of these words, “nearly complete collapse,” that is accurate. The crypto industry did not come near completely collapsing last fall. Another company in the cryptocurrency industry, a new venture startup company in an innovative tech space at that, went out of business.
The Internet Never Stopped Growing After the Dot Com Crash
More crypto businesses and altcoins will fail in the crypto industry in the future. That doesn’t make blockchain different than any other sector of the economy. Additionally, the Bitcoin price and altcoins were all in deep correction in 2022. But the context is that was after an equally steep bull run through November 2021.
But the production of crypto networks throughout the crypto winter of 2022 did not come near total collapse. They did not fail. They did not even falter. Bitcoin hashrate and difficulty continued to climb through the crypto winter. The network’s miners continue to find a new block on average every ten minutes and fulfill transaction orders for addresses.
Activity on the Bitcoin network remained robust. Daily new active BTC addresses were the picture of healthy globally-scaled digital platform usage. The most popular altcoin, Ethereum (ETH), saw the same robust growth in staking and network usage.
So it is simply misleading to say the cryptocurrency industry nearly completely collapsed in 2022. It may be that many people with only a superficial understanding of crypto think that is what really happened.
But crypto didn’t almost disappear last year, and neither is it a “pet rock,” as JP Morgan’s Jamie Dimon recently taunted.
Drawing a Comparison
Crypto’s future fortunes look today like the Internet’s did in 2000. Even after several dot com stocks crashed and burned in a widely discussed media spectacle. The parallels are almost eerie.
Back in 1999, the Internet had the same sort of criticism in the media that crypto has today. They said it was a passing fad. They complained it was too clunky and difficult to use. The public, at first, regarded the Internet as a neat toy for computer nerds.
But they did not see its potential to connect the entire world. Neither do they today see the expected future value of organizing that global connection to be more fair and secure.
Most people did not invest in “tech stocks” even after everybody and every business started keeping the Internet within arm’s reach 24/7 within about a decade after the dot com crash.
Back in 2000, the fud pieces were flying about the Internet. They said it was a place for scams, wire fraud, and over-hyped businesses that didn’t really produce anything. Not that what they were talking about was entirely untrue.
They were reporting facts, but not really to efficiently sort through them and put them in their greater context to leave their audiences better informed.
From Failure to Shaping the World
The newspapers started a small panic in the public over the Y2K bug as if it were going to be the end of the Internet.
Today they use the Internet for their circulation. But the same organizations used to mock the Internet on giant, folded pieces of paper delivered to people’s houses by a truck.
Many investments made in a late-90s economy, flush with capital and low-interest financing, at the height of dot com mania, were ill-advisable. They burned up when the stock market corrected.
But it was not really hard to notice some of the Internet companies that would go on to win the next couple of decades. Some dot coms had customers and revenues. Others had a dot com website, with some pictures and their email address on it, but not customers or sales.
Amazon, for example, was a well-publicized Internet success story when the Internet was new. It has a sharp business model and founder. This dot com made more books available to its customers than any other bookstore in the world ever had. Then they shipped your order right to your door and took great care of their customers.
Just $1,000 worth of AMZN, bought at $18 a share at its IPO in 1997, had a market value of over $2 million in 2021. That was just a little over two decades later.
Many cryptocurrencies have already scaled like that in far less time than Amazon stock did.
A Ton of Developer Interest in the 2020s Is In Crypto
Young developers in 1999 all wanted to build dot com websites and video games. By the late 2000s, they all wanted to build mobile apps and video games.
By the late 2010s, they all wanted to build cryptocurrencies and DeFi apps (and video games).
Really talented computer science students, creative entrepreneurs, and smart venture capitalists are excited about cryptocurrency today the way those same kinds of business people were about the Internet twenty years ago.
The emergence of the digital network itself created a global connection revolution. That was characterized by the ability to make digital copies of so many things. Moreover, digital computer copies were super instant, super fast to send around the world, and all of it was super affordable.
There was a flood of digital abundance.
Cryptocurrency is the next step in that connection revolution. Blockchain is an industry that supports the global computer network by reliably producing digital scarcity and securing it to its owners.