Almost everyone in the US has encountered an article or two, or two thousand, describing bitcoin, cryptocurrencies or blockchain technology over the past 6-9 months. Indeed, the number focused on bitcoin/cryptocurrencies spiked with bitcoin’s price during the fourth quarter of 2017, as shown below. Now that the price and press coverage have dropped sharply, we believe many observers are asking, “Was that it?”
A comparison of this press coverage to that during the last bubble would suggest that cryptocurrencies were in a bubble, and that it has burst. As shown below, the number of US articles focused on cryptocurrencies peaked at roughly the same percent of all US articles as those during the dot com mania. In other words, most business news readers probably learned about the investment “opportunity” in bitcoin last year.
That conclusion falls short, however, as it does not account for differences in the maturity not only of the capital markets supporting dot com stocks and cryptocurrencies but also of the internet and blockchain technologies. The dot com bubble inflated to 6% of global GDP whereas, at its peak, the value of cryptoassets hit only 0.8%. ARK believes that among the primary reasons capital did not follow prices and media attention in the cryptoasset space was the lack of capital market infrastructure, particularly regulatory and legal, which prevented institutional and other broader market participation. During the dot com boom, equity markets were ready and willing to participate, in hindsight too much and too soon. In contrast, the lags in cryptoasset infrastructure development could accrue to the benefit of this new asset class in the long term.
The convergence between price and the utility value of blockchain technologies also helps to explain differences in media mentions between the internet bubble and the cryptoasset ascent. Because “dot com” articles encompassed both the equities and the technology, many focused on the technology and explained the internet services and products themselves. In contrast, because the prices of cryptoassets incorporate the future utility value of an underlying technology that is evolving rapidly, articles tend to focus on price movements on crypto exchanges.
Media mentions including the term “internet” peaked just after the Nasdaq in early 2000, dwarfing mentions of cryptocurrencies seen late last year which, in turn, had not been seen in the internet space since 1994. In that year, interestingly, the first web browser had been in development for just a few years with little clarity on how the technology would proliferate, nor how pervasive it would become…perhaps an apt description of where cryptoassets are on the timeline of development today.
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