Bitcoin and Altcoins Will Collapse 80 Percent!

As the bitcoin and altcoin market rallied, the total market cap recaptured $2 trillion. However, given the parallels between the dot-com boom in 2000 and the current crypto market, one expert believes a bear call is appropriate. Analyst’s inferences cryptocoin.com compiled for our readers.

Could Bitcoin drop 80% like early internet company shares?

According to recent research, the adoption curve of cryptocurrencies is comparable to that of the internet in the early 1990s. However, one analyst predicts that as a result of speculative investments and the flooding of capital markets supporting dotcom businesses that ultimately fail to profit, the crypto market will drop roughly 80%, as the Nasdaq did during the dotcom bubble in 2000.

Cryptocurrency analyst Tasha Che offered an opinion on Twitter, estimating the possibility of the crypto market entering a long bear market with a similar drop to the Nasdaqs in the 2000s. Che talks about the following key parallels.

• By 2000, the internet had 413 million users. Meanwhile, 10% of working-age internet users, or about 6% of the global population, own some form of cryptocurrency, according to GWI statistics.

• Both markets have seen a multi-year bull run as a result of the hype around “breakthrough technology” that is “little supported by real use cases”.
• “A headwind from monetary policy.” In a comparable macroeconomic context, the Fed increased interest rates by a quarter point for a year in 2000 to curb rising prices of goods and services.

• According to Bloomberg, “The Bloomberg Internet Index peaked in 2000 at $2.9 trillion (about $3.5 trillion in today’s money), before dropping to $1.2 trillion at the end of the year. “A market cap of $2.5-3 trillion would bring crypto at the same pace as dot-com valuation back then,” Chen says.

The expert admits that “history does not repeat itself” because it is not a “bear call”, but believes it is “in the cards” given the circumstances. The missing factor is a bluff top, defined as “a strong increase in price and volume, followed by a rapid drop in price and again a drop in high volume.” Chen believes that “we will definitely see a repeat of history” if the boom peak happens in the next few months, with the $3 trillion crypto returning to its market cap level.

opposite point of view

But other commentators have pointed out that Chen’s data does not account for the nearly 5-fold increase in the M2 money supply, which rose from $4.6 trillion in 2000 to $18.45 trillion in 2020. Another Twitter analyst said Internet speculation in 2000 was excessive. He pointed out that aside from mood, the two markets may not be systematically related, given that it fuels an inflated market, while noting that crypto speculation can be considered a “parallel liquid market.”

It was also mentioned that Bitcoin (BTC) is a unique example as assets are more reactive. According to analysts, price increases may lead to increased use, while at the same time causing an increase in consumption. The dotcom bubble, on the other hand, had little effect on internet usage, as “no one needed to acquire AMZN stock to use Amazon.”

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