The past couple of months have been a rollercoaster ride down on a dangerous crash course.
The combined market cap hit a 60-day low on Tuesday. Trending bearishly down from a peak of $832bn on January 7th, 2018 to a measly $275bn.
And if you zoom out further, the trend actually gets worse.
The question on everyone’s mind — is this the crash?
Phases of a bubble compared to total market capitalization
Making matters worse is that it’s not just crypto that has been dropping like a stone. On Monday the stock market dropped 1,175 points. It was the worst day for stocks since 2011.
There is speculation as to what is causing the drop in crypto, but the reality is that on the same day the stock market dropped 4.6%, crypto dropped 15.2%. As the stock market turns bearish, people start pulling their more risky investments.
If investor confidence creates manias, then investor nervousness ends them.
To navigate through this, we dug into historical data to look for patterns. Looking at bubbles in the dotcom crash, housing crisis, and Chinese stock bubble, there was one trend that jumped out. Specifically, it was which companies survived the dotcom frenzy.
What happened in dotcom?
While it isn’t a perfect comparison, dotcom does offer some predictions for the future of crypto.
During the dotcom crash, thousands of companies and trillions of dollars were wiped out in a matter of months. Companies like pets.com burned $147 million to be left with nothing. Yet, despite this financial implosion, some companies survived. Those that did locked in market share, hired the best people, and grew into the giants they are today.
We analyzed the top companies that survived the dotcom era and the pattern was painfully obvious.
- Help people MAKE money
- Help people SAVE money
This makes intuitive sense. Imagine that you’ve lost all your money in a market crash. Are you going to be spending extra on more convenient makeup and pet toys?
No. You’re going to try to make money to offset your loses. You’re going to seek out deals. And the companies that provided this are exactly the ones that pulled through the recession.
MAKE and SAVE
Ebay became the online equivalent of a garage sale. Helping people sell their new and used goods and get great deals.
Amazon focused relentlessly on reducing costs. Passing these savings on to users by offering 10–30% discounts on most books. They also rolled out an online auction and started paying website owners a commission for products sold on their site.
Both Priceline and Expedia doubled down on helping people save money on travel expenses.
What about the companies that offered convenience for cash: etoys.com, webvan (groceries), boo (clothing), beautyjungle (makeup)? Unfortunately their stories didn’t end well.
Why does this matter?
Because during the crash Amazon stock dropped from $107 to $7! Priceline dropped by 99%!
Investors that got in at these prices would go on to net 20,000+% returns.
If crypto follows this trend, the pressing question then becomes — which are these companies in crypto?
We dug into altcoins to find ones that fit the mould.
Steem (STEEM)
A token for helping publishers make money. Popular application Steemit (which uses STEEM), is like Medium except content creators get paid.
When things crash and content creators are choosing which platform to publish to, will they choose to make $0 or some fraction of the $22million already paid out in STEEM? Having a top post on Steemit regularly pulls in $1500–2000. Not bad for something you were going to do for free anyway.
Assuming more websites and publishers adopt the STEEM token, this could be similar to ’99 when website owners started pushing Amazon products for a commission.
Vanywhere (VANY)
Connecting “skillers” with users, Vanywhere is a marketplace where freelancers monetize their spare time.
Imagine a chef with a few free hours in the evening. He logs on to take calls, using his skills to answer people’s questions. On the flip side is a father, trying to figure out why he can’t seem to airdrop between his iPhone and Mac. He logs on and places a call, looking for a skiller to answer his simple question.
Their users make money by solving the frustrating small daily problems that everyone faces. The process for becoming a skiller relies 100% on approval from the community and since Vanywhere is in collaboration with the Quantum blockchain, it will be able to scale.
Siacoin (SIA)
Decentralized file storage. Like Dropbox, but using blockchain. Reducing storage fees and helping users earn money by hosting files.
The cost to store 1 Terabyte on Sia is only $2. Compare this to the $10 per month that Google, Dropbox, and Apple charge. It is also fully decentralized which will help with scaling to meet demand.
By creating a marketplace for cloud storage, Sia can help people make and save money on a commodity that clearly everyone will need both now and in the future.
Nano (formerly RaiBlocks, XRB)
Fast and free digital currency.
While there are benefits for Nano as a payment option, their biggest advantage after a crash is the zero transaction fees. This opens up opportunities for users to save money, as well as helping other people make money in ways that were previously not feasible (micropayments).
This is by no means an exhaustive list. If you know some great companies that we missed, please describe them in the comments below.
Will the pattern hold? For now it’s tough to tell, but if so — now might be a good time to pick up some good coins “on sale”.
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