The Wall Street Journal (“The crypto party is over”) notes the similarities between current price adjustments in cryptocurrency markets and the late 1990s collapse of many internet companies. To be fair, investors at the time were right in their basic thesis: the internet was indeed the future. But that didn’t stop many of them from seeing their money plummet as hundreds of internet companies went bankrupt.

At the height of this “dotcom bubble,” as I will lazily call it, I was involved in a few consultancy projects advising investment banks on technology infrastructure. I remember one of the teams I worked with at the time had a dismissive umbrella term for nonsensical dotcom startups that didn’t have a sustainable business model and were created simply to scam retail investors in IPOs while rewarding insiders. They called these companies “”.

Whether it’s now politically incorrect to use the term or not, I’m not sure (I’m sure social media will let me know soon enough), but it still comes to mind almost every day when I read about a new scam crypto asset pulling the ponzinomic business down and taking money with investors. I’ll see something about a machine generating images of chimpanzees with randomly matched sunglasses and just file it under usedcondoms.eth and forget about it.

(By the way, I recently discovered that used condoms are actually a viable business. Vietnamese police have discovered such a business and instead of praising independent prophylactic entrepreneurs for their valuable green stance against disposable consumer products for use unique, they raided them and seized 300,000 recycled condoms that had been boiled, dried and reshaped with a wooden prosthesis. This means I’ll need new terminology, so I’ll use the more British “” from now on.)

With Bitcoin
and ether
plummeting and a variety of tokens going to zero and funds exploding everywhere, I think it’s reasonable to ask how crypto should be viewed right now. Are crypto companies a load of most of which will go to the wall while sowing the seeds of the web3 giants to come, a mimetic echo of the dotbombs? Or should we see collapsing currencies and a whole bunch of tokens as a modern tulip bubble?

I think it’s the latter, and it’s the most important.


The Dotcom bubble refers to the period from the dawn of the consumer Internet in the mid-1990s and Netscape’s IPO to the peak of the Nasdaq in March 2000, when a myriad of companies online companies were formed with the primary objective of market share rather than profit. When the rot set in and stock prices fell by three-quarters over the next two years, many of these companies simply disappeared. But a few – like Amazon and eBay – have continued to dominate the new trading environment.

How is it like the crypto crash? Well, between September 1999 and July 2000, insiders of Internet companies collected to the tune of 43 billion dollars, double the rate at which they had sold in the previous two years. Indeed, the month before that Nasdaq peak, insiders were selling more than twenty times as many stocks as they were buying. As Brian McCullogh wrote, normal people were the most aggressive investors just as smart money was coming out. In 2002, 100 million individual investors lost $5 trillion in the stock market.

The key point is that in the dotcom bubble, it was retail investors who paid the price, just as it was nurses and taxi drivers who bought tokens on the backs of celebrity endorsements that are being destroyed today. today, it is therefore an interesting comparison. But what does that mean?

The dotcoms are gone, but not the Internet. In the next era of web2, as we now call it, companies like Facebook and Alibaba, Twitter and Netflix
were founded and exploded. That’s why some observers think we’ll see a similar explosion in web3 businesses when the crypto winter is over and it’s certainly not impossible. Will the demise of usedteabags.eth and the emergence of amazing new Web3 companies be the biggest impact of the crash?

Listen to the flower people

As you will have noticed, recent online discussions of Bitcoin falling through the $30,000 and then $20,000 barriers frequently refer to the well-known speculative mania of the Amsterdam “tulip bubble” in 17th century.

Admittedly, there was indeed a kind of bubble in the Netherlands obsessed with exotic products from the Orient, but that had nothing to do with the economic cataclysm of the popular imagination. by Peter Garber see that modern writers who invoke it “take it for granted that it was a fad, selecting and organizing the evidence to emphasize the irrationality of the market” seems to me correct.

Yes, merchants really engaged in a frenzied trade in tulips, and yes, they paid incredibly high prices for some bulbs. And when a number of buyers announced that they would give up their futures contracts, the market collapsed and caused a little crisis. But as I pointed out in Forbes last yearit was not a mass market mania: it was the speculation of a small group of wealthy people who could afford to lose money.

(That doesn’t mean we shouldn’t study the tulip bubble and learn from it, and not just about financial services. Anne Goldgar, author of “Tulipmania: money, honor and knowledge in the Dutch Golden Agewrote that while it may not have been a financial crisis, it was a social and cultural crisis because “the Dutch bourgeois faced a series of problems which anyway , seized their culture: novelty, exoticism, capitalism, immigration”.

I think the view that cryptowinter is a social crisis, not a financial one, deserves more detailed exploration than I can afford. I will be very keen to read what social anthropologists do about it.)

More importantly, and more relevant today, is that when the bubble burst it left behind a more efficient and better regulated financial market and that this financial market then played an important role in creating the Dutch Golden Age based on trade and commerce. The impact of this more efficient financial intermediation was so great that balances at the Bank of Amsterdam became a pan-European currency and, as an Atlanta Fed article on the subject notes, the Dutch guilder played a role “like that of the United States”. dollar today”.

So to say that crypto is like the tulip bubble is actually to say that a relatively small number of people will lose a lot of money (things could be worse this time around, because according to a recent survey, 56 % of US adults, approximately 145 million people report owning or having ever owned a cryptocurrency and three-quarters of this group, or approximately 107 million Americans, invested in crypto for the first time in the last two years), but the long-term result will be a more efficient financial system, which is pretty much what The Economist meant when it observed that “because tokens can be digital representations of almost anything , they could be effective solutions to all kinds of financial problems”.

(When I talked to serious financiers about the tokens, they all said pretty much the same thing: when the regulatory structure is in place, they’ll tokenize everything.)

If this cryptocrash indeed resembles the tulip bubble, then frankly, that’s a very good thing, because the new regulatory environment that will support tokens, digital currencies and decentralized finance will be the crucial factor in creating a new age. trade gold based on new technologies, whether Bitcoin goes to zero or $100,000 next year.

(Uh oh. I just found out there’s actually 27 things to do with used tea bags, so I’ll have to go back to the drawing board and come up with something else instead. Any suggestions will be gratefully received.)