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Is crypto market mimicking dot-com bubble?
Investors would be the ones who lost the most money when the market crashed, not the crypto influencer or crypto platform.
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Representations of virtual cryptocurrencies are placed on US dollar banknotes in this illustration taken on Nov. 28, 2021.
(Reuters/Dado Ruvic)
M
ost people in Indonesia are not familiar with the dot-com bubble. Indeed, this is reasonable because at that time, the Indonesian digital economy had still been left behind. In fact, there are glaring similarities between the dot-com bubble and the current crypto hype.
In the early 1990s, the military developed the foundation of the internet, and Tim Barnes Lee perfected it with the world wide web. Eventually, the United States Congress allowed the world wide web for commercial use. This marked the rise of dot-com companies, whose business model was based on the world wide web.
The bubble started when numerous dot-com companies raised funds through the capital market. This event marked the rise of internet companies and the beginning of financial crisis.
At that time, driven by fear of missing out, impulsive investors bought almost every kind of dot-com stock. There was a massive enthusiasm from investors who were, actually, still confused about the dot-com companies. The investors’ negligence was the main ingredient in the dot-com bubble crash.
Ironically, right now, the negligence is being repeated in the crypto assets and Non-Fungible Token (NFT) world. Do Indonesia’s crypto investors understand the backbone of technology, the price mechanism and the business model of crypto? Furthermore, are they truly aware of the risk of the investment?
Just like Peter Lynch said, “You get recessions, you have stock-market declines. If you don’t understand that’s going to happen, then you’re not ready; you won’t do well in the markets.” It is obvious that the market participant’s minimal product knowledge is an identical factor in both phenomena.
In the simplest terms, every investment is a game, and there will be a loser or winner. Sadly, in the dot-com bubble, the average investor was the loser.
