Since last year when I started selling the bitcoins I’d acquired five years ago when it was at $100, you’ve heard me talk repeatedly about how there are lots of parallels between the dot com bubble from two decades ago and the current cryptocurrency bubble.
Let’s walk through and update some of the parallels to explain why I’m starting to nibble a cryptocurrency or two again despite the fact that I think The Great Cryptocurrency Crash, as outlined in my book, isn’t over.
- Back in 1999 and early 2000, most any company with the words “dot com” attached to their name could go public using an IPO and raise billions. Small cap penny stocks could announce that they were going to launch a dot com for their company, like K-Tel Records, and their stock would go up 5-10 fold immediately.
- In 2017 and early 2018, most any company with the words “blockchain” and “cryptocurrency” attached to their name could go public using an ICO and raise billions. Small cap penny stocks could announce that they were going to launch blockchain strategy for their company, like Riot Blockchain, and their stock would go up 5-10 fold immediately.
- Back in 1999 and early 2000, the good, the bad, the fraudulent dot coms had all gone up so much that their valuations were insane, as hundreds of them were worth billions. Amazon went from $1.50 in 1996 to $85 in early 2000 (see charts below). Priceline.com hit $900 per share, giving it a valuation of tens of billions of dollars.
- In 2017 and early 2018, the good, the bad, the fraudulent cryptocurrencies had all gone up so much that their valuations were insane, as hundreds of them are presently worth billions. Bitcoin went from $100 in 2013 to $19,000 in early 2018. Stellar Lumens hit 80 cents, giving it a valuation of more than $15 billion.
- Then, as the bad and fraudulent dot coms went to $0 as the bubble popped from its top in March 2000 to its bottom in October 2002, even the great dot coms crashed too. Amazon fell 95% from $85 back to $5 per share before the crash was over and it took six years before it got back to $85 (see charts below). Priceline fell 99% from $900 to $8 before the crash was over. There were some spikes as the stocks collapsed, of course — they didn’t head straight down.
- Now, as the bad and fraudulent cryptocurrencies and blockchain companies are headed to $0 as the bubble has popped, even the great cryptocurrencies and blockchain companies are likely to crash too. Bitcoin has so far fallen 70% from nearly $20,000 back to $6,000 and I expect it’s headed much lower before the crash is over. The Stellar Lumen has fallen from 80 cents to 17 cents and I expect it’s headed much lower before the crash is over though. There were some spikes as the cryptos have collapsed, of course — they didn’t head straight down.
- Amazon actually bottomed in 2001, a full year before the Nasdaq and dot-com bottom was put in as 90% of the dot-coms that came public went to $0 (see chart above).
- It’s possible that Stellar Lumens and/or Bitcoin and/or some other existing publicly-traded cryptocurrencies could already be putting in their bottoms even if the broader cryptocurrency market itself is still going to crash further as 90% of the existing cryptocurrencies go to $0.
So here’s the story. I’m starting to nibble a tiny bit of Stellar Lumens.
I’ve seen several companies, ideas, blockchain ideas being built upon the Stellar platform. I think Stellar’s focus on being a payments/banking platform and how they’ve built it and how they’ve positioned it is all coming together to put the company in a potentially winning position in the next ten or twenty years as blockchain and cryptocurrencies revolutionize our world and banking systems and computer networks and so many other things. I spent an hour on the phone with a Stellar founder just last week as I continue to do my homework on which cryptocurrencies and blockchain companies we will eventually start buying.
To buy Stellar Lumens, it’s not easy just yet. Rather than try to explain how to buy Stellar Lumens, I’m just going to link to a Google search of “How to buy Stellar Lumens.” My colleague Jake Fistes has been helping me with my crypto purchases, but I’m stepping up and learning how to do it right now personally too. And, as always, I suggest you do some of your own homework before making any moves with your own money. Visit Stellar.org and visit this page about Stellar Lumen wallets and be careful out there, as always.
The Stellar Lumen is currently trading at around 37 cents. If Stellar becomes a winner, over time it will get much easier to buy Stellar Lumens and that would help create a virtuous cycle for the Stellar network and the Stellar Lumens. But for now, I am buying a tiny TINY bit of Stellar Lumens and I hope that it crashes another 90% in the next six months so I can buy more at lower prices.
I do think Stellar Lumens and Bitcoin look like they could become an Amazon and/or Priceline of cryptos. But remember even if they become HUGE in another decade or two, that they could drop much further first. And remember that cryptocurrencies have no underlying fundamental value in the way that stocks with earnings and revenues and assets do.