With Greater Perspective, The “Crypto Bubble” Isn’t A Bubble, It’s A …….

I’ve written 18 crypto related posts since I saw the crypto light on June 29th. Most of those blog posts could have been titled “what I learned about crypto this week”. After three months, I took a breath, and on October the 8th, I wrote my first thought piece “7 Thoughts On Blockchain, Cryptocurrency & Decentralization After Three Months Down The Rabbit Hole”. It’s, by a margin, the most read Medium post I’ve ever written. The 5th thought is “ It’s A Bubble….So What”. I went on to explain:

I say “so what” because I believe in Amara’s Law: We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. This is part of the reason we get bubbles. We get overexcited about a new technology and we drive up prices beyond any reasonable valuation. Bubble’s can go on for years. The internet bubble lasted 5+ years.

With that thought piece at it’s 3 week anniversary, my thinking has evolved. While it’s almost trite to say it, it totally feel’s like we’re at a Cambrian Explosion period in crypto. Similar to how the the Cambrian period opened up an exceptionally wide range of previously unavailable ecological niches, the emergence of blockchain, cryptocurrency, and decentralization is opening up a wide range of previously unavailable markets as well as new competitors to incumbents. Sure, most of the new crypto entities coming in to being today will die out, but many of the ones that survive will be epic.

Given that view, I think the three charts below give additional perspective to the crypto bubble debate.

1. Amazon Price Chart 1997–1999

The chart below looks at the meteoric rise of Amazon’s price from it’s IPO in May, 1997 (at a split adjusted $1.50 a share) to a peak of $105+ in April, 1999. Amazon’s share price went violently up 70X+ in under two years. Was that a bubble?

The 2 “s”’s in the brown boxes in the chart above indicate times that Amazon’s share price split.

2. Amazon Price Chart 1997–2001

The chart below looks at the implosion of Amazon’s stock price from it’s actual peak in December, 1999, at $106+, to it’s low of less than $6 in September, 2001. That’s a drop of 95%. Is that a bubble bursting?

3. Amazon Share Price 1997–2017

Since Amazon’s share bottomed out in September 2001, it is up more than 180X to Friday’s close of $1,100. From it’s IPO price of $1.50, it’s up 275X, generating a compounded annual return of 39%.

With the perspective of more time, when we look at Amazon’s price chart from 1997–2017, that violent up ‘97-’99 (bubble?) and violent implosion down ‘99-’01 (a bubble crashing?), we see it really wasn’t either of those.

It turns out Amazon’s share price from 1997–2001 was just a ……. blip.

In 20 years, when crypto has disrupted as many industries as the internet has, and we look back at previous violent crypto price swings, and those certain to come, they’ll simply be blips in crypto’s long term rise.

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