In the last post we covered how cryptocurrency has its dot-com moment and now it is time to get building. This is something that is often disputed, as it was in the comment section.
For that reason, we will go into what is taking place along with some ideas that substantiate this point of view.
It is easy to get caught up in market action. This is what people grasp onto yet it is only telling a part of the equation. To fully understand what it taking place, focus must be on the totality of the situation.
So let us dive right in.
More Than Markets
To start, it is best to look at the comment in dispute.
As we can see, there is a belief that this is going to be much bigger. Certainly, the crypto bubble and the Dot-Com, in terms of magnitude, were not even close. So if that is the basis of our analysis, it is a logical conclusion.
Before going further, we have to look into the article linked in the comment. Here we see some immediate flaws.
This was the conclusion.
So many of the dot com companies provided an empty, needlessly redundant service with high overhead and poor management. These are problems that we don't have to worry about. Its much easier to manage a dev team than an entire corporation especially when the foundation of your project is built on top of a tried and true platform that another team is constantly improving (Ethereum and friends).
As it turns out, we are seeing projects going under all over the place. Business like Celsius are filing bankruptcy while projects such as UST and LUNA are under investigation (as well as being on life support).
In addition, the entire article, which is the presumed basis for the logical conclusions, compares charts and the overall price movements over time. This is only analyzing market activity.
To me, this misses a great part of the equation. Looking at markets only provides a piece of the equation.
The Internet During The Dot-Com
One of the advantages of being older is the fact that we went through events such as this when they happened. For this reason, we can relate how things were.
The Internet in the late 1990s was still mostly an American platform. There was some activity from other parts of the developed world yet the majority of development was from the U.S. It was not the global mechanism it is today.
People accessed it via desktop. There was no mobile at that time. Here we see another factor that restricted the spread.
Most people were technologically inept. Personal computing still was rather new. It only started to roll out in the schools 15 years earlier. During this era, even version of Windows were still DOS based.
On the development side, those who were doing the coding were highly educated, coming from some of the finest schools. It was a period not far removed when the input into this realm was relegated to government and upper level education.
Basically, we were dealing with a paradigm shift that was still slow in taking off. The growth rate was outstanding yet was dealing with a very low starting point. Keep in mind, offices at this time still required wired run to network computers together.
It is not misguided to categorize this as the Stone Age for this technology. To show how ancient it was, Gmail did not appear until 2004 (the same year as Facebook).
The Technological Baseline
To really grasp the analysis requires understanding technology. By this, we are not referring to bits and bytes. Instead, it is the pace of technological innovation and the implementation rates. This is more art than science since it requires tapping into the backdrop that is coming from other areas.
With the Dot-Com era, the baseline was nowhere near the hype. If we were in the Stone Age with this technology, why did the market price it to a point where it would take a decade to return? This is how big the bubble was.
Today, it is impossible to overhype the Internet. What took place at that time cannot happen now since this medium is worth tens of trillions of dollars. It generates that much (or more) in annual revenue. A large portion of the global population cannot operate without it.
This is part of the backdrop that cryptocurrency is operating within.
The Baseline Much Higher Today
Many correlate the two periods and for sound reason. Web 3.0, with the implementation of native currency to the Internet, has enormous potential. The impact is likely to be the original version on steroids.
When we compare today to the Dot-Com era, we quickly realize it is a completely different world. Thus, the curve of the baseline is much quicker than it was in that period. When we look at some metrics, we see how this is unfolding.
What is interesting is the user base for cryptocurrency mirrors what it was for the Internet during the Dot-Com bubble.
The number thrown out for cryptocurrency users is around 300 million. Estimates vary of course but this seems to be an accepted stat, at least as we entered 2022. This puts us at the level of early 2000.
Here is where we can see the difference in hype. What took place last year with cryptocurrency did not match the Dot-Com bubble in that regard. They are not even close. If you think Venture Capital was crazy over the last few years, you should have seen it then. College dropouts were getting millions in funding simply by saying they were building an application. Since few, including the VCs knew what that meant, they handed over the cash.
Yet we already see the metric of number of users matching what was there already.
Another important factor is shown at the bottom of the user table being reference here.
As of the last estimate, there are almost 5.4 billion people online today. In March 2000, 300 million. The advantage for cryptocurrency is that the Internet is already built out. Now we are seeing things such as Starlink looking to provide rural service to millions more.
People are much more technologically advanced today. The majority of the population knows how to use the Internet and that percentage is growing each day as older portions die off, being replaced with younger counterparts.
This is vital for development. Unlike the previous era, applications are built by people all over the world. This does not have to come from the corporate realm either. A kid sitting in a bedroom in India has an equal chance of producing an app that is used by 100 million people as someone in Silicon Valley does.
With blockchain and cryptocurrency, we see participation taking place on a global scale. This will only accelerate the increase in the technological baseline. Network effects happen much quicker today as compared to 20-25 years ago.
Other Factors
There are other factors that can figure into this situation.
The way things are going, it is likely that confidence in governments keep waning. This is going to create a challenge for them as people decide to switch to alternatives that offer potential as compared to the failed systems that governments keep pushing.
We also could be entering a period of prolonged economic headwinds. Certainly for a significant portion of the population, this was the case for the last decade. The masses tended to fall further behind as compared to those at the top. This means that, when people are hurting, they are open to other options.
This will only help fuel the adoption of cryptocurrency adoption as legitimate projects start scaling.
A final piece is that Boomers are almost done. Their run as the power center is nearing an end. Over the next decade, the younger generations (Millennials) are going to be assuming control. The key here is they people have a different outlook as compared to the previous generations. They were reared with technology. There was no learning it in the educational sense. It was more like learning to walk; you simply moved into that area naturally.
In Conclusion
When we factor in the technology baseline, the ability to hype to absurd proportions wanes. Sure, there will see some projects that are insane in terms of how the market treats them. However, from an overall perspective, the underlying value of the technology keeps accelerating.
Just like with the Internet, there will be a time when cryptocurrency, as a whole, cannot be overhyped. It will be akin to the networking of computers globally to seamlessly share information and provide near instantaneous communication.
Will the market get to a 10x as compared to where it was last year? Yes I believe it will. They key is that, when that occurs, it is unlikely that it will be hyped at that point.
The growth rate in many different areas, especially infrastructure, is astounding. It will only validate the market activity even more.
By the top in the next bull run, we will likely have over a billion crypto users globally. By that time, a market pullback will be for factors other than hype popping.
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