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A lesson from dot-com era for crypto investors

The dot-com boom and bust

From June 1997 to January 2000, within two and half years, Amazon stock had a 70x run, i.e., 7000% (you think the present stock market bull run is dazzling?).

From January 2000 to October 2001, during the dot-com crash, in a bit over one and a half years, Amazon stock dropped by more than 90% (but still 3.5 times higher than the 1997 IPO price).

From October 2001 to now (February 2021), in a bit less than 20 years, Amazon stock had a 600x increase (60,000%).

The lesson:

When a market crashes, all assets get destroyed, real or fake, good or bad, especially when they are in the same category. Amazon dropped by more than 90% during the dot com crash, just like a typical dotcom company did.

The difference is that Amazon came back and thrived after the crash, most other dotcoms died.

There is only one reason. Amazon had a real business, and a really good one, both in the business model and in execution, while others didn’t.

Be prepared for another crypto crash.

People say that crypto already had its big crash in 2017–2018, so there won’t be another one. Well don’t assume too much.

The first crypto crash was a response to scams, or a manifestation of them if you look from that angle. The level of crypt ICO’s scam infestation was unique, even compared to the dotcoms. As bad as the dotcoms were, most of them weren’t straight scams. They just didn’t have the right business model. But most of the early crypto ICO’s were outright scams.

However, thanks to the first cleansing and shaping up during 2017–2018, the current crypto world has become much more like dotcoms before they crashed in 2000. Relatively few of today’s crypto projects are pure scams like those in 2017.

However, most still do not have a viable business model, perhaps not even an honest one (short of a straight scam). They are all just taking a ride on the pumps and hypes, and on people’s lack of understanding as well.

In other words, the first crash upgraded the crypto world from a fraudulent world to a stupid one.

So another crash is going to happen. It is inevitable. It is the law of economics. Bubbles are bubbles not because they grow fast and grow large, but because they don’t have a real economic and business foundation. With very few exceptions, the current crypto market does not have a better economic foundation than the dotcom market did. Among the several thousands crypto assets, less than 5% of them may survive. But those that survive will thrive.

The dot-com boom lasted for about five years. The new crypto boom started less than two years ago, so there still may be some mileage on it, especially considering the current crazy atmosphere and environment.

As a result, BTC might go to $100K or even higher, and other cryptocurrencies might also go up significantly, before the next crash.

But eventually they will crash, and most of them will never come back. Some might survive but will be at a much lower valuation. See for example, A Future with BTC and BSV.

The fearful thing one can learn from the history is that, when a market crashes, everything in it goes down with it, especially the assets in the same market or category. Crashes are irrational, just like bubbles are also irrational, and will have little discrimination.

Therefore, when the crypto world crashes, the best asset on the best blockchain will also go down with it.

To me, the best asset in the crypto market and the best blockchain in DLT is Bitcoin Satoshi Vision (BSV). See A Future with BTC and BSV.

BSV is to the crypto world what Amazon was to the dotcoms, because BSV has the most solid foundation in technology, economics, business model and execution teams.

But if crypto crashes, BSV will also crash.

However, for people who truly understand and believe in the philosophy, technology and business potential of the best asset, a crash would be a great buying opportunity, like buying Amazon at the end of year 2001.

In addition, even if they do not, or are unable to, buy at a bottom, those who truly understand why they have invested in a certain asset are far more likely to survive the crash because they will less likely sell at the bottom or near the bottom (this is not to say that “hodling” is always the right strategy per se, as it is only relevant to the extent there is truth in one’s understanding of why they hold).

Besides, there’s always a question of timing. The question is, when the crypto crashes the next time, where will the price of your best currency land, in comparison to the current price? This question is important because it relates to how you make a decision on buying it now.

The answer mostly depends on the timing of the crash. If the market crashes tomorrow or in the near future, the price will of course go much lower than its current price. But if it does not crash until years later, it might come down to a price that is much lower from the top then but still higher than the current price. Remember, Amazon dropped 90% in the crash, but still landed at a spot that was three times higher than its original IPO price. So timing is important.

However, the most important thing is still your choice of the best asset to stick with. If you have chosen the wrong horse, timing means nothing because you are riding it into zero anyway. Find your “crypto Amazon” or leave if you cannot find one.