What Bear Markets Look Like

It’s hard to look at the price charts of the big crypto assets and not cringe. 

But it helps to look back to an earlier time, when a new sector was emerging, and understand what can happen.

Amazon peaked in the Internet bubble in late 1999 at around $90/share.

Almost two years later, at the trough, you could briefly buy Amazon at $6/share.

And then it took until late 2007 for Amazon to trade above the highs it reached in 1999.

But of course, all of this is ancient history and if you look at Amazon’s chart today, all of that turbulence is hardly even visible.

But for those of us who were investing in tech and tech startups back in 1999-2002, that time will forever be etched in our minds. It was a brutal period during which our belief in the Internet and its potential was sorely tested. Many friends and colleagues left the sector and never returned.

So while crypto asset prices are down 80-95% in USD terms over the last year, they could and probably will go lower. Amazon was down 80% a year into the post-bubble bear market and it got cut in half again before it made a bottom almost two years after it peaked.

What we have yet to see in crypto land is when they kick you when you are down. And that is certainly coming. Regulators came after the Internet sector in a big way post the bubble and that seems likely to happen in the crypto sector too.

And most everyone in big companies wrote the Internet sector off, cancelling their Internet efforts as a fool’s errand. That seems likely to happen in crypto too.

And many talented people left the sector. That seems likely to happen in crypto as well.

But those who stayed were rewarded, although it took a long time for that to happen. We didn’t see meaningful paydays in the Internet sector until the 2007-2008 period and the big paydays didn’t start coming until 2010 and beyond.

The thing to look for in the downturn is signs of life. There were little projects that turned into big ones. Blogger was started in late 1999, almost shut down many times in the next few years, and was picked up by Google in 2003. Myspace, LinkedIn, and Facebook all emerged in the 2002-2004 period, as the Internet was finally coming to life again.

So that is my framework for thinking about where we are with crypto and where we are going.

I think some crypto asset (and possibly a number of crypto assets) will have a price chart like Amazon’s current one in 18 years. But we will have to do what Amazon did, hunker down and build value and survive, for quite a while to get there. And I think things will get worse before they get better.


Comments (Archived):

  1. William Mougayar

    And for an added perspective, as Howard Lindzon pointed out in his email today, the FAANG companies (Facebook, Apple, Amazon, Netflix and Google) also have lost $800 billion in the past 60 days, versus crypto that lost about the same since ($700B) January 2018. The comparison with the FAANGs ends there, as these companies are giants and their business is solid.I agree with you on the analysis, but I think the crypto recovery time frames might be shorter than the dot-com one was. One of the reasons is that most of the world is already connected online, and now crypto is a layer on top that can take advantage of this inherent connectivity.Winter has come early for crypto, and I do see a further decline in prices (if prices are one indicator) most likely towards the $75B-100B level for the sector. In the meantime, we need the technology to continue to mature so that the projects and apps on it become easier to develop and get adopted.I recently researched the Apps/protocols/technologies with over 1 million users in crypto, and only a handful appeared outside of the wallets and exchanges accounts. So, money is still the big crypto App, but we need to diversify that sector with more meaningful vertical and horizontal applications that start to permeate usage habits beyond just being a better way to handle money. http://startupmanagement.or

    1. jason wright

      Don’t you think that January 2018 (crypto’s $700B drop) was a tax timing event? It had nothing to do with the state of any given project or the sector as a whole at that moment.

      1. William Mougayar

        Hmm. I’m not sure about that.

        1. jason wright

          what do you think triggered the sell in January?

          1. William Mougayar

            there was no Jan sell-off. It was a gradual downward move from the highs that were reached in January.

          2. jason wright

            Why from January?

          3. William Mougayar

            Jan 2018 was the high point for the market caps of all crypto.

      2. Lawrence Brass

        Jan 2018 crypto drop can’t be analyzed out of the scope of the mid 2017 climb, imho. Both ends of the curve were a bit crazy.

        1. jason wright

          maybe, and certainly crypto has that (necessary) craziness, but for those who cashed out in Jan ’18 their tax bill is still some months away from being due. It’s very capital efficient to cash out in Jan. It’s a year of ‘free’ money.

          1. Lawrence Brass

            I understand your point now. Tax over crypto gains/losses is an interesting topic.How do you report crypto losses to the IRS or local tax authority?https://www.irs.gov/pub/irs

          2. jason wright

            losses? ha 🙂 I am exploring my options going forward though. The UK’s April to April tax year is not advantageous in the crypto space, but mainly i’ve become philosophically and politically tired of contributing economically to the power of what is a corrupt British state. Democratic? er, not really.

    2. Richard

      The idea of looking at crypto in terms of market cap is the right approach. It took Warren Buffet and Charlie Munger, arguably the best investors of our generation, a life time to build a company with a a market cap of 500-600 billion dollars. Even in theses high valuation days, is there a single VC who thinks a market cap of 100 billion makes this investibe?

      1. William Mougayar

        The current market cap of crypto represents a basket of over 1,500 currencies, so it’s not just a single aspect, but several.

  2. falicon

    If you’re in it for the lottery, you’ll eventually be shaken out.If you’re in it for the passion, never even think ’bout getting out.Price is a fickle beast, controlled by the unknown.Develop value at least, and the true path will be shown.

    1. fredwilson


    2. creative group

      falicon:We have been Day Traders since the early 90’s. We are value investors. Where is the value in crypto-currency? The Blockchain yes the controlled speculative crypto no.Issues which smart money understand regarding crypto-currency:1. Means of payment2. Store of value3. No intrinsic valueOpinion article on recode by Bill Harris regarding his view on the crypto-currency sector.https://www.recode.net/2018…The opinion is that of the author which we don’t share in it’s totality.Captain Obvious!#UNEQUIVOCALLYUNAPOLOGETICALLYINDEPENDENT

      1. falicon

        It has been my belief for awhile now that the blockchain concept doesn’t really work without the crypto part of the equation:http://falicon.com/post/136…BitCoin has proven (so far) to be the most widely understood and accepted version of this, and so I’m not really worried about it’s long term future (or price).Ethereum has been the ‘easiest’ to play with and actually build something on top of (as a developer)…and so that’s the one I’m personally still most interested and playing with.I put U.S. cash into both…I’ve taken a profit back out in U.S. cash over the years (so my ‘worst case’ would be a break even on the money front now)…but my stance for the last couple of years has mostly been, cash goes in with very little intention of coming back out (my intent/hope/belief is that I won’t need to convert it back to get the massive value/use out of it going forward — though that may still be years away).I’m OK with massive peaks and valleys right now (we buy as much as we can risk in the valleys; we mostly hodl in the peaks). I know a lot of people who feel the same — but I would *still* say only put in what you are willing to RISK and be patient with (go to Vegas or sports betting if you want to gamble).

        1. Richard

          Last paragraph makes no sense. You defines a speculative gamble. Why go to Vegas?

          1. falicon

            I never claimed to make sense…But my point was time frames…if you want to get a quick payoff from a big risk, you might as well just hit Vegas…crypto, like most tech plays, require a lot of time, patience, and concentrated effort.In the crypto world, “we the people” is the house…

          2. LE

            Interesting psychology wise. Are there any Vegas games which don’t pay off either right away or at a set time in the future?So you go to Vegas you know right away when betting if you have won or lost. Even if you bet on sports you know when you will know.So I wonder if there is a comparable bet such that you bet it goes up it goes down you can cash out at any time but there is also an incentive to hold for a future up and that future and the feeling that it could happen is what keeps you in the game. [1][1] My team will win this year let’s say.

          3. Richard

            Out of the money long dated call options.

          4. Jim Ortiz

            good luck sourcing those

          5. Richard

            Wrong ! Investments take time for big wins, speculative bubbles do not. When did bitcoin morph into an investment ?

        2. awaldstein

          Curious about your statement that the blockchain on itself is not enough.What about pure supply chains?IBM and Walmart and a plethora of smaller vertical ones. Agree that there needs to be a model to justify the build but this is a damn good match for that at scale.

          1. falicon

            Those tend to be databases relabeled for marketing hype (in my opinion, all the bad parts of crypto with none of the upside and really just confusing the marketplace).In my opinion, the whole point is to have it distributed and not centrally controlled by any one or two parties…you need/want 3rd parties to do the processing/validating/storage for the network (this is why the systems can be truely open and trusted).The (primary) incentive to do that is the crypto currency they earn for doing it (and so the value they get from the crypto has to be higher than the cost of the mining service they provide).Specially the IBM and Walmart approaches from what I’ve seen seem as though they would be better served by an open API and a public, read-only, version of their database for that API (since really that’s all the blockchain they are offering up seems to provide, but with slower transactions, more hardware to back it, and more overall costs).You prob. have dug into those approaches more than I have though…so perhaps there is something interesting there I’m missing? What do you see as the reason/advantage to vertical blockchains? What’s the strength to the approach?

          2. awaldstein

            This is a great question.I’ve looked at a bunch in wine and food, and of those without a tokenized economy, I agree, none make sense.There is one that has a closed blockchain to service the alcohol industry that makes more sense as the complexity of this is kinda hard to fathom without contracts built in.For the perishable and basic food supply chain, I have not dug into this as deeply as I am thinking about taking on a project but haven’t said yes yet.The thing to realize is that the supply chain for food is literally 115 years old and even stores like Whole Foods are insanely primitive and there are infinite breaks in the chain. Certification, recalls, ingredient tracking and honestly nothing more than a notion today.

          3. LE

            For IBM I see the value as managing the service for someone else. Maybe roughly similar to what Redhat has done for Linux. Or Rackspace does by managing AWS.So IBM has no need for the blockchain themselves let’s say. However they can make money managing the process and providing technical help for a company that does or thinks they do. And since it’s the blockchain and not a database on a server that IBM controls management and oversight can them be moved to a different provider if a customer wants to do that for some reason ‘no lock in’. I can see how a decent fee can be extracted for that service.The other option is what I will call mirroring a traditional database. I just am making this up after reading your comment. It’s hybrid. IBM (or AWS et al) holds the traditional database. But it is mirrored to the blockchain kind of like a backup that is not controlled by the same entity that has the database. But not mirrored like traditional databases are. Not that existing wheel.Lastly IBM could simply be a node on a blockchain that is small and held among other known entities.So one node is AWS, another is Google Cloud, another is IBM, another is Microsoft. I don’t know how many are needed but it wouldn’t be thousands if the right holders.Does this make any sense? Is anyone doing this?

      2. Richard

        Fred and company are no Einstein. Einstein wrote “It seems as though we must use sometimes the one theory and sometimes the other, while at times we may use either. We are faced with a new kind of difficulty. We have two contradictory pictures of reality; separately neither of them fully explains the phenomena of light, but together they do.”Fred’s calls as to what Bitcoin is have been nothing more than a roulette call and he has been (one of) the dealers.

      3. SuperResistant

        As of today, there is absolutely no technological innovation in blockchain, it is pure marketing hype and you fell into it. A blockhain is a very bad database that cannot even being use for storing data.

        1. creative group

          SuperResistant:We didn’t fall for anything. We realize their is no intrinsic value in crypto-currency. Period.We realize you are trolling Fred and if we have any issues or disputes we take it directly to him. We don’t require proxy fights via other contributors. We support Fred’s social views 80% of the time. Fred’s investments can’t be compared with anyone other than high net income individuals. We can’t compare financially.Do have at it without using us. We can stand up for ourselves in any disagreement.Captain Obvious#UNEQUIVOCALLYUNAPOLOGETICALLYINDEPENDENT

          1. SuperResistant

            Why do you care about intrinsic value ? It is very subjective and doesn’t tell anything about the next move in price. Markets are cyclic, there are trends, that’s all that matter. Right now crypto are in a bear market, it doesn’t matter you love it or hate it or think it has or hasn’t “intrinsic value”, you should not have any and wait for the moment no one talk about it any more to accumulate.

          2. creative group

            SuperResistant:We didn’t major in finance but still understand fundamental analysis. If you couldn’t understand if any financial instrument measure based upon intrinsic value as a tool then there is no need to continue discussing investments or value of anything with you. You put your finger up and see what way the wind is blowing. No way to measure crypto-currency when it can be manipulated.Captain Obvious!#UNEQUIVOCALLYUNAPOLOGETICALLYINDEPENDENT

          3. Michele

            If you think freedom from political use of money and central banks has no intrinsic value, then yes, blockchain technology is shit and crypto have no intrinsic value. If crypto fully becomes a way to freely exchange value between anyone in the world then probably it will have a value for everybody and so an intrinsic value.

          4. SuperResistant

            I see you’re lost and nervous. Maybe investing isn’t for you ?

    3. LE

      If you’re in it for the passion, never even think ’bout getting out.I think what you are saying applies to software, programming, sports, artistic pursuits and hobbies for sure.But I think it’s different with crypto. I see that more as needing the perceived payoff in the end and different than what I have mentioned.I think the social proof is also important. I am sure the people who collect and have lavish model train setups in their basement are not as stoked as they would be if more people were doing model trains.Fred said ‘yupppppppp’ in reply to your comment. But my guess is that you and others will greatly outlast him in enthusiasm on the sector.

      1. falicon

        In my book, a large part of crypto *is* programming (it’s just a new flavor of it).There is a price component that helps it all go…so I get your ‘perceived payoff’ point, but that’s more about the behind-the-scenes pipeline/technology/network (mining) than it is crypto itself. A required part, but not the whole.As a developer, I could build within a large number of ecosystems these days…but the one with the most real freedom, potential upside, and interesting tech. and business challenges is crypto (right now).

        1. LE

          Are there any upsides where “potential upside” != payoff ?Another question. I am not a gamer as you know. What happens to gamers who are good or have skill in a hot game at a point in time and then that game falls out of favor and like my stepson move to the new game?Sure some will stay with what they are good at (like Larry Wall with Perl I supposed; remember him?) but most others leave and no longer fun.

          1. falicon

            Some payoffs I think about that aren’t directly or purely ‘money’…1. Adoption (the draw of building apps on social in the first place).2. Reach (also see social; but this time think bigger global scale to many ‘emerging connected’ segments).3. Better Legos. Truly open data/data sets (built/backed by crypto) allow for collective knowledge to be generated and augmented….for the game question, that’s actually a big driver behind my one crypto project ( cryptogameobjects.com )…the idea that you can at least take your items/loot from game to game and get some added value/benefit from your “time in”. Not officially released yet (because hard), but wrestling with the idea and the implementation for the last year plus (here and there)…eventually I’ll get a version out there and we’ll see what I learn…But yes – for every ‘big win’ there are probably 10x ‘left behinds’…my point was the ‘left behinds’ aren’t (hopefully) not sad and stuck but rather happily engaged and challenged (they weren’t really there for any of the payoffs the rest of the world was looking for — but that’s what generally gives them the ‘real’ chance at the big win).“You can’t always get what you want. But if you try sometimes you might find…You get what you need” – The Rolling Stones.

  3. Tom Labus

    “Nobody knows you when you’re down and out” Bessie Smith 1929

  4. Girish Mehta

    “And most everyone in big companies wrote the Internet sector off, cancelling their Internet efforts as a fool’s errand”.No. Did not happen.Was 2000-2002 a brutal period for those in tech investments ? Yes. Thats what happens after big market crashes.Did big companies “write the internet sector off” or “cancel their Internet efforts as a fool’s errand” ? No. Not only did that not happen, you would have lost your credibility in a big company at that time if you were to point to the dot com bust as a reason to write-off the Internet or to consider it a fool’s errand. I was at a big tech company which was a leader in the use of the Web in the ’90s, and which had a large number of the Fortune 500 as customers.Astonished to see this statement.

    1. fredwilson

      many did. some did not.

      1. Girish Mehta

        That’s not an accurate characterization. Thats ok, we’ll have to disagree.I know you were there, but I was there too.

        1. Andrew Cashion

          In 2006 I helped launch an “internet company” which later lost out to golfnow.com and was crushed by the iPhone coming out. When I called people up in that year people were still adverse to the idea of doing business online and said no to us. They were scared of it. “The thing”You were at a big “tech” company. The small guys like me working off of the floor in an apartment were big losers.Was true for me then and I agree for now.

          1. Girish Mehta

            I do not question your experience.”And most everyone in big companies wrote the Internet sector off, cancelling their Internet efforts as a fool’s errand”.The narrative changes if that did not happen, and why.

          2. Andrew Cashion

            Sentiment is not necessarily a true act.

        2. LE

          I was there as well and can say that from my experience in catering to companies of all sizes that my business increased every year let’s say. It certainly didn’t drop in any significant way on the scale that I was operating at. It amazed me. In the business that I was in previously (out of college) I had to actually break a sweat and work hard for sales. Every day. multiple salesman, direct mail, advertising, really beat my brains out (which was fun and intermittently reinforcing but still work). To get a good customer was a long process you had to steal them from someone else literally or wait for a competitor to screw up so you got a chance. When I got involved in the internet (which was worldwide and not limited geographically like what I did previously) [1] it was like all I had to do was stick my hand out and simply catch what came by. Really. I actually thought that at the time. I remember running an ad in the Economist and picked up a customer doing offshore asset protection who said ‘oh I saw about you in the Economist’. Kept him as a paying customer for over 10 years I think. And I could tell many stories like that. Even my mother would go to a dress shop and mention what her son did and the owner would say ‘wow have him call me’.[1] What I did previously could be sold internationally also but it simply wasn’t cost effective or practical to do so nor was there any advantage for a customer.

          1. Girish Mehta

            Yes. The Internet was a lot more, long before kozmo, webvan etc..The economy slowed between late 2000 – ~ start of 2003 (starting 3Q of 2000). Companies pulled back on expenditures. Executives traveling on business class started traveling economy. Requisitions that were not filled in the first 3 weeks of a quarter, got frozen until the next quarter. Total IT budgets got tighter.At no point did most everyone in big companies “write off the Internet sector” or cancel their Internet efforts as a “fool’s errand”.Like you said, the Web provided efficiences. In a tough environment, companies look for greater efficiencies. Companies looked closer at how to deploy the Web internally in their organization and get efficiencies, as well as externally for customer engagement. There was a term called “intranet” back in the second half of the ’90s to distinguish from the internet. After the bust, the term ‘intranet’ itself declined, and then simply went away…along with the distinction. It was simply Web-based.

          2. Vasudev Ram

            Was that your domain buying/selling business?

          3. LE

            Hah we don’t discuss that here!

      2. Richard

        Small sample sizes have large standard errors, large standard errors lead to incredibly large non-reproducible but non-random events. You might scratch your head at this, but it science. What you are doing is nothing different than proving a horoscope or reading a expression stained cup (a Lebanese custom).

        1. sigmaalgebra

          The usual estimator for standard deviation, when it exists (it doesn’t have to), the one with (n – 1) in the denominator, is unbiased which means its expectation is the actual standard deviation of the distribution from which the data, independent and identically distributed random variables, was (I irritate the English majors by regarding data as singular, like rice and some other quantities) drawn.For unbiased the basic definition is what I just gave. The estimator with the (n – 1) is commonly derived in first texts on mathematical statistics. A classic and amazing paper that says much more (with markup from D. Knuth’s TeX) is:Paul R. Halmos, “The Theory of Unbiased Estimation”, {it Annals of Mathematical Statistics,/} Volume 17, Number 1, pages 34-43, 1946. being a classic, available on-line at:https://projecteuclid.org/d…Uh, unbiased is a very important and solid old subject, not nearly the latest hyped fad fraud like ….Halmos was one of the best writers on probability and statistics. He got his Ph.D. from J. Doob, as in Stochastic Processes, (still of value, e.g., for second order stationary stochastic processes, e.g., ocean wave noise, power spectral estimation, digital filtering, time series analysis, etc.) at U. Illinois and then was an assistant to J. von Neumann at the Institute of Advanced Study at Princeton. At the time, von Neumann was interested in Hilbert space theory, functional analysis, and quantum mechanics.Later Halmos, at U. Chicago, with Savage, wrote the landmark paper, still of value, on sufficient statistics and did a beautiful job cleaning up what then was a messy topic. The key to the paper was the Radon-Nikodym theorem (amazing that that relatively simple theorem can have so many astounding consequences) in measure theory with a very cute proof by von Neumann (in W. Rudin, Real and Complex Analysis). There is a more traditional proof, also nice, in M. Loeve, Probability, etc. Later Halmos wrote on ergodic theory, entropy, measure theory, and much more.

          1. Richard

            Thanks, any thought on the weaknesses of survival analysis as currently applies to immunize oncology ? Goring from lanes 2 to phase 3 with objective endpoint of PFS (professional free survival) and / Overall survival. What can I look at that other might miss or misstate ? Thanks!

          2. sigmaalgebra

            I don’t have anything like a sufficient background in the relevant medicine. If someday I get cancer, then I’ll regret saying that.IMHO, by a wide margin, bio-medical statistics is the most important (lives depend on it, and there is money from at least NIH, maybe from the pharmaceutical companies, and likely also from the NSF; e.g., Mike Bloomberg has given, apparently most recently $1.8 billion, to Johns Hopkins, usually for medical research) part of applied statistics.The times I got into applied statistics, I usually saw a need for some original research in mathematical statistics and did that, and the real problems I was addressing were much less important and likely less complicated and challenging than serious questions in bio-medical statistics: So, from that experience and what I have seen in pure and applied statistics, I’d guess that for your question some original research, maybe particular to features of your question, or some deep dive into what is in the libraries would be appropriate.I’d ask around and zoom in on what the best bio-statistics groups are and ask them. There may be such a group at Johns Hopkins, the main university and/or the medical school. The group Eric Lander is in at MIT might have such a group. Of course there is the NIH campus in Bethesda, MD. When I was teaching at Georgetown U., I got the impression that some people there were working in bio-medical statistics with the NIH campus.It may be that for clinical trials, the statistical techniques are mandated in rules of the NIH, FDA, etc.Likely in part you will want an estimator, want it to be unbiased, hopefully minimum variance (usually asking for too much) and use it with an hypothesis test with a “p-value”.I would have been thrilled to have worked in applied math for medicine, e.g., bio-statistics, but I never interviewed at such a place. Now I’m concentrating on my startup — the core has some math derivations I did, as far as I know new.One of the lessons in life, business, startups, and research is, while a broad background can be a big, maybe huge, help for a bigger tool box, eventually have to focus; I’ve learned that lesson.I did like that I dug into sufficient statistics; at least when I was in grad school, it seemed that only a tiny fraction of statistics profs understood that topic. So, with that topic, I got a more broad background relevant to statistics than most statistics profs. I suspect that I could use sufficient statistics to improve on a paper I did publish in mathematical statistics; but that is only a guess, and now I’m concentrating on my startup.Two more: IIRC, at Stanford statistics profs P. Diaconis and B. Efron, e.g., big on resampling, a darned cute idea, have worked with data from medicine. So, maybe there is some strong interest in bio-statistics at Stanford. Also medical statistics was the first motivation for the L. Breiman work, e.g., Classification and Regression Trees, that the AI/ML communities have tried to borrow from. [Breiman was a very bright guy, student of M. Loeve at Berkeley, a really good writer, and one of my favorite authors.] Then Breiman was at Berkeley, so maybe there is still some interest in bio-statistics at Berkeley.One more: At University of North Carolina, look up Alan Karr! He is a very bright guy, student of E. Cinlar at Princeton, has long been close to mathematical statistics, and more recently has been doing a lot of work with real data, likely some medical data.

      3. Richard Kain

        I’m in the “many did” camp as well. Some of those that did are still suffering for it, especially retailers. One of them even notably provided fuel for Amazon’s rebound — Target! In 2002 (give or take?) tired of the expense of developing their own “ecommerce” operations they outsourced web operations to Amazon. It might even hold that the larger the publicly-traded company the more likely they were to pull back from corporate transformation.Media conglomerates also slammed the breaks on thus missing major opportunities and enabling the Netflixes of the world to break out of their own then brick-and-mortar operations.Retail and media were two sectors that should have been most alert to the possibilities of new distribution and aggregation and yet almost entirely whiffed.

    2. cavepainting

      Fred’s statement is not incorrect. There was a size-able drop in internet hype and “e-business” hysteria. I worked for Siebel at that time and we did a significant reshuffle of our portfolio to focus on the employee facing applications on the intranet than customer facing accessed via internet.People were not writing off the internet but things surely cooled down quite a bit.

  5. Mario Cantin

    Cringe is right. It does help, however, that there has been a precedent with the internet crash.

  6. kidmercury

    Yes and a lot of the companies that ended up being defining Internet companies, most notably Google, weren’t even around in the wake of dot com bubble crash I. Similarly a lot of the tokens and networks worth focusing on are not yet here

    1. fredwilson

      Google was started in late 1998. It was pre bubble, but really took off during the collapse. It’s IPO in 2004 was the moment the Internet woke back up in a big way

  7. iggyfanlo

    FredGreat post and reminds me of Carlotta Perez model and we”re in the trough of disillusionmentI’d proffer that we need to see real use cases being solved by crypto that drives underlying valueAnd that point I think we can see a bottom

    1. fredwilson

      100% agree

    2. LE

      reminds me of Carlotta Perez model and we”re in the trough of disillusionmentNot meaning to trash Carlotta but I am wondering if her model includes things that never got out of the trough? Or only examples of things that in the end worked out and survived. (I don’t know the answer I am only raising the question).

    3. Richard

      It would have been a amazing post to make about bitcoin 10 years out – but not an entirely risky post to make – in 2008. Today, it’s a huge Yawn ! Boring ….. Mike Drop

  8. BillMcNeely

    I’ve lost out twice on Bitcoin. I’m going to start building a position in it.

    1. creative group

      BillMcNeely:The bottom of the crypto-currency hasn’t reached a bottom. Continue to wait for a better entry point. Even Fred anticipates more turbulence in this sector. We would only consider this speculative sector under the $100 range which appears more hopeful than reality because of the many players in Asia, etc with the ability to make plays that control major swings.Captain Obvious!#UNEQUIVOCALLYUNAPOLOGETICALLYINDEPENDENT

      1. Richard

        Yep, even assuming Fred’s hindsight call and astrology gazing come true, one would have had 10 years to get back into Amazon – sales and customers growth compounding for years – before the stock runs up.

  9. TeddyBeingTeddy

    classic Gartner Hype Cycle. In the “trough of disillusionment”.

  10. jason wright

    Speculative and unduly pessimistic. If this is a consensus view then a contrarian may wish to take note. The whole point of crypto is that it is a distributed ecosystem, not subject to the influence of one nation or government or financial market. the 1990s internet rush was largely a US affair. Crypto is by definition not.

  11. David A. Frankel

    Fred, great perspective. However, I think sometimes many of your readers forget about their own risk profiles versus yours when they read your comments on crypto. You can afford to take a long view on this speculative emerging investment. I suspect many of your readers, particularly the younger ones, are not in the same boat. As you rightly point out, just as we saw with e-commerce companies in the late 90s, there is a long way to go before this becomes a sustainable asset. The average investor can afford to wait until things shake out a bit before jumping into this asset and still get considerable upside.

    1. Richard

      And it gets worse, if you are young, you have the miracle of compound interest. To all of you who have given away 5-30 K and have 40 years of runway, compound this money at 6, 7, 12 and 15 and 20 percent. use the rule of 72. You will see just how much this dog and pony show is really costing you.

    2. fredwilson

      Yes. I agree. That’s why I wrote this in early January 2018https://avc.com/2018/01/tak…I wrote a number of posts like that in Dec 2017 and Jan 2018

      1. Mario Cantin

        I paid heed. #thanksforthat

    3. cooperbry

      I agree and I’m waiting with my gold and silver until then. I’m waiting for this “asset” to be actually useful as a currency which it currently is not. It also suffers in terms of the store of value proposition if you want to call it money (just like dollars).

  12. John Frankel

    Given that there are no fundamentals, in the classic sense, use technicals to trade and invest. Make sure you are seeing higher highs and higher lows before you start to accumulate. So assets never see these, some do. The technicals give you comfort that you are not the only buyer at the table.

    1. Pointsandfigures

      Agree with liquid assets that have transparent markets. How do you possibly use technicals in crypto when the data is so spotty? Unless you have the order flow (Cumberland) it’s almost impossible to assemble it. I have heard a lot of “mean reversion” chatter. What if the mean is $100?

  13. LE

    And many talented people left the sector.Interesting to note for those that were not around during that time was that the people that were in the sector to begin with were there because they were not tied to something solid for the most part. So in the 90’s you had people in the Internet who either had recently graduated from college, or weren’t tied up with a solid business or job. Hence they took a chance on the new thing because they ‘had nothing to lose’. You didn’t find many people that either left secure jobs to get into ‘the new thing’ or ditched a professional career. And you didn’t find many recently decreed professionals (doctor, lawyer, accountant) turning down great out of school opportunities to either ‘start a startup’ or work for a startup (which it wasn’t called back then btw.)In my own situation by around 1995 I had spent a great deal of my own money to start a traditional type business when the Internet came along. I had taken over 2 years getting set up to do that traditional business by traveling various places and buying equipment and learning what I needed to know. (I have videos that I took of all of this..) [1] By the time I was done learning, the internet was there. I had already started to have some sales (and hired a single part time employee) and had a warehouse space to operate in. So I stopped that, sold the equipment (to a guy from Beirut Lebanon), and used the same location to get a T1 to do internet things. My point is if I had been further along and not starting out I would not have made the same decision. I took a loss but it was manageable and obviously I don’t regret that I did so in retrospect.[1] I had to get in a plane to travel for what you can easily just google or watch youtube videos today.

  14. Pointsandfigures

    Until someone somewhere builds something useful….turns out Google was pretty useful.

  15. Mario Valente

    In other words: HODL and BUIDL.

  16. LE

    And most everyone in big companies wrote the Internet sector off, cancelling their Internet efforts as a fool’s errand.Going along with what Girish said (in his comment) below let me do an intervention here. Not even close to everyone in big companies wrote off the sector. They may have not put as much effort into it but they certainly were still using it personally and finding it of value. So sure they slowed the efforts. But the value in it was very very real. I can say from personal experience catering to business at the time (and starting in the 90’s) that nothing changed as far as non speculative interest. What did change is valuation for those things that I would sell that I make money from that I will not mention here. That dropped off totally for a few years for sure (and did have me worried). Luckily, unlike crypto, there was no way to unload the assets even if I had wanted to do so. So I held them and obviously that paid off greatly. But my point is that was speculative. The base value of actual customers using the product (the internet) did not drop. The value was there.

  17. Officiant

    I am so confused!

  18. george

    Thoughts: Amazon really began to flourish when the platform garnered greater utility – broader product offering. They didn’t do that alone – Amazon partnered with thousands of suppliers and built a very strong network effect (namely wholesalers). Moving forward, the users lock in (utility), and Amazon shifts strategies, which move products more vertically; leverage, higher margins and profits appear.Point here, I believe the charts map out when crypto starts to pattern their model in similar fashion – partner to create greater utility, which will lead to broader adoption and acceptance.

    1. sigmaalgebra

      My guess at the secret of the success of Amazon was when the Internet and Web browsers, e.g., with good versions of JavaScript, were ready for the Amazon Web site, in particular, were fast enough to send a LOT of really good pictures of products. Also a biggie was that they took a high end approach to the computing, that is, the server farm: They knew that they needed one heck of a server farm and built one, one so good that they were able also, apparently as just a byproduct, to have the best cloud farm in the world, Amazon Web Services, AWS.Also, IIRC, the banking was not yet ready, e.g., with nice, safe ways to use a credit card to buy over the Internet.In year 2000, the Internet, Web browsers, client computers were not even close to ready for the current Amazon Web site. E.g., Windows users were still on Windows 95, NT, or, for the leading edge people, Windows 2000. Then users and Web sites had to hold way down on pictures because for nearly all users the Internet bandwidth was too darned low (slow).Given current computing, IMHO, what Amazon is doing is just obvious and available to anyone with a good computing shop. E.g., lots of small companies e.g., Tiger Direct, Newegg, have good shopping Web sites. Wal-Mart has made a lot of progress and seems to be improving rapidly.Net, the key is that the computing and Internet became ready, and Amazon was right there at the head of the line to take advantage of it.

  19. Gene

    With 24/365 trading these market cycles are sped up 3X. Enterprise adoption will filter in throughout 2019. Pilot programs will migrate to integration full and then a transformed internet into 2024.

  20. Mark Essel

    In 2000 it was a great time to buy the companies that survived. Who’s that in crypto?My money’s on Coinbase and other service providers as well as companies which bridge the digital/physical divide like Mattereum.If Coinbase had a 10 year bond, I’d buy it. Since I can’t, I add Ethereum every couple of months.

  21. nipulpatel

    What’s the best book or article(s) on the late 1990s crash of the internet bubble? history is an important teacher which many people fail to learn from unless you actually lived through it. This all feels recent enough where it should resonate though.

  22. Prokofy

    Generally, you make a good point about the Internet and tech and its ups and downs and booms and busts before it stabilizes.But there’s a big difference between Amazon and Bitcoin/Crypto. Amazon, even if it is all Internet-y and digitalized, is a basic American old-fashioned premise: you offer something for sale, you deliver it, like a Sears catalogue. Even at its beginning, there was transparency as to the merchants, the products, and the processes. Sure, it wasn’t always ideal but there were complaint processes built into it. The premise is basically like an old-fashioned American General Store — lots of things for sale from different manufacturers, a market that managers preside over and adjudicate and advertise but the makers set the price — and you can see who they are, and there is feedback within the system.Not so Bitcoin. It is anonymous, secretive, irresponsible — and based on the geeky notions of privacy and secrecy for me, not for thee. Crypto, that enables it is called — what? Crypto. Because it seeks to make secret and non-transparent the marketing system. The mantra now is to say, oh, Crypto is the thing, Bitcoin is corrupt — even the supreme hacker Edward Snowden says this today. Like Silk Road and Tor, no sooner do anonymous, unaccountable systems appear than you get crime, corruption, child porn, illegal drugs, and then even assassins for hire. Amazon hasn’t spawned assassins for hire, only disgruntled techs who make games that ridicule it and legions of lefty press articles about how horrible this latest version of capitalism is for humanity.Generally, don’t you think the stock market reflects the valuation of the old-fashioned premises of transparency and accountability rather than secrecy and unaccountability? That is what makes for the long-term. The tech that serves the former and not the latter.

  23. jason wright

    Yesterday i forgot to wish NYC and its people a happy birthday. Happy Birthday New York City!!!

  24. Angelo Santinelli

    Asset bubbles are an artifact of fiscal and monetary policies that promote them. The real question for me is what will it take over the next 10-15 years for cryptocurrencies to become a recognized store of value – stable and broadly accepted in trade for goods and services? In Japan the market has been supported by government regulations. Is the U.S. likely to adopt any type of regulations to support or prohibit crypto? Would an economic crisis larger than what we saw in 2007/8 speed up adoption? Then there is power. How much would really be needed if crypto were to become a global store of value like gold and other precious metals? And then there is privacy. Transactions with cryptocurrencies produce a lot of data. In the end who owns that data and how will it be used? Lots of unanswered questions means continued volatility. Like many venture backed ideas you are either a believer and you invest for the long haul, or you aren’t and you pass.

  25. Adam Sher

    I agree with your sentiment, @fredwilson:disqus , that the world is figuring out how to value blockchain and crypto as a sector. I also agree with you that the fact that just because prices for those assets are low relative to Dec 17/Jan 18 peaks does not mean the sector failed. Out of the dust of this price correction will rise some distributed network company (companies) that will win. Pointing to Amazon, who was one of a few winners, ignores the tech sector, which did not recover like that. I believe a more apt analogy would be the NASDAQ index and the crypto sector. It took 14 years for NASDAQ to sustain a a price level above its 2000 peak.Again, there will be some individual companies in this space that perform more like Amazon, but I think the sector is more likely to perform like the NASDAQ index over the next 16 year period.

  26. Andre P Gagnon

    Amazon at $6 sold books…. Amazon today sells everything and more of it then most companies! IE its value! Bitcoin has such a far way to go to … It’s possible but Its more likely that Coinbase the guys who sell bitcoins become the amazon not the books they sell! Netscape, AOL were massive platforms whats the stock value today? By 2000, AOL was the nation’s biggest Internet provider and worth $125 billion time warner is worth $77,270 Mil (As of Today)! Don’t be fooled by narratives and Ignorance! South Sea Stock, Tulips and yes that very .com bubble!

  27. Ariel Gabizon

    I think the whole “it’s going to be like the internet” argument that gets used endlessly needs more justification – why assume that that’s the right analogy – and not something else that crashed and went to zero permanently? People using the internet argument need to justify more why crypto is like the internet besides there being crashes on the way.

  28. michaelpalmeter

    Nonsense BS. Waste of time for both the author and the audience. It ads nothing but some useless “if this is the same as that” speculation.

  29. Hamish MacEwan

    > What we have yet to see in crypto land is when they kick you when you are down.What we have seen is kicking all the way up and down.The Bank of England, IMF, and BIS have all come out, in the space of days, strongly attacking bitcoin in an attempt to damage forward looking positive sentiment:https://bankunderground.co….https://www.imf.org/en/Newshttps://www.ecb.europa.eu/p…Now yoru article and Michael Casey’s https://www.coindesk.com/th… are pushing a narrative of self-harm and blame.Rigour and honesty, yes, sledging by believers is not necessary.