CoinShares recently released its 2019 Crypto Trends Report which presents a treasure trove of information about the crypto space and its relation to the global economy. One profound insight is that they expect Bitcoin (BTC) and the crypto space to follow the trend of tech stocks after the dot-com bubble collapse.
Indeed, the dot-com bubble which peaked in the year 2000 is probably the most similar economic phenomenon to the initial coin offering (ICO) craze and rampant speculation in Bitcoin (BTC) that peaked in late 2017. Essentially, the rise of computers and the internet opened up a whole new sector in the economy, and soon companies were being formed for every type of business that existed in the regular world, with the main difference being these companies were running their businesses via websites.
Speculators rushed in and invested in basically every company, even if the companies did not have a rigorous business plan or were not very unique. Internet companies also got used to plentiful investment availability and spent cash too quickly without achieving their stated business goals.
Eventually, internet companies began to go bankrupt, and it set off a chain reaction as investors got spooked and stopped investing, and regulators cracked down to protect investors.
As the CoinShares report notes, it took 7 to 17 years for tech stocks that survived the crash to recover to their all-time highs. During this recovery period, the remaining internet companies focused on building strong business models to make their own cash rather than depending on investments. This led to the formation of tech giants such as Amazon, Google, and Facebook.
So far the crypto space has followed this story almost exactly, except instead of launching businesses that took everything from the real world and made a website out of it, in the crypto space companies were launched for every business idea in the physical and digital world and given a blockchain twist.
Investors rushed in, causing the ICO bubble, and companies spent their cash too fast and many of them found that blockchain did not give them a competitive edge over businesses that already existed in other sectors. Soon ICO companies failed en-masse, scaring away investors and bringing down the regulatory hammer, sparking a chain reaction and the 2018 bear market.
Now the crypto space is in the stage of companies having to form strong business models to make their own cash rather than depend on plentiful investment, and theoretically, this should eventually lead to the formation of major crypto and blockchain companies similar to modern-day tech giants. There will be far fewer companies, but the companies which do exist will be far more lucrative as well as far more beneficial for the overall economy.
However, like with the tech space, this process could take many years.