Bitcoin giveth and taketh away, like no other asset class before it, but analysts keep searching for Bitcoin’s “twin”, assuming that one might exist from another era that would provide an insight into the future price behavior of the world’s favorite digital asset. This search is not some kind of new age, outside of the box thinking. Several analysts have pinpointed the early Internet Age as a likely match, since price valuation theories were thrown out the window in deference to speculation, driven by human psychology.
Tony Spilotro at NewsBTC states:
It’s not uncommon to see today’s crypto market compared to the dot com bubble of the early 2000s. Both were emerging technologies that offered untapped potential and promise and took the entire world by storm. Investors flocked to budding brands harnessing the power of the new internet technology in droves, driving up the price of stocks like Amazon long before the online bookstore became the wide-ranging digital brand it is today.
There have been ample studies over the past few decades of the psychology of investing, since human emotions play as big a role in selecting and closing a position than due simple analytics. These studies typically produce a diagram, like the one below, which reflects the role each human emotion might play over time:
This textbook type chart can be found in any discussion of investment cycles. In this case, it pertains to the formation of a “bubble” and its eventual resolution, courtesy of the Financeandcareer.com website. It has been popping up in the crypto press after Crypto Winter came to a close. The chart mirrors in many ways the experience of Bitcoin, as well as of Amazon for that matter, and could explain the high state of sensitivity among the Bitcoin faithful of late. The question is: Are we somewhere between “Return to Normal” and “Fear”, with “Capitulation” and “Despair” in the headlights?
With this premise established, researchers have soon selected likely periods for comparison – For BTC: 2015 to 2019; For AMZN: 1997 to 2001. According to Cointelegraph, Ceteris Paribus, an analyst with Messari, a crypto analytics firm, contends that:
While the two assets are markedly different, they have both allegedly traded on pure speculation at different points in their histories.
Upon comparing the price charts, Spilotro added:
The charts shared demonstrate that human psychology rarely changes, and thus, markets typically behave in similar manners. As is the case with Amazon, so long as the underlying asset still has value, after a long period of consolidation, the asset can go on to rally once again, making the initial peak look like a mere blip on a price chart.
Amazon, however, was one of the big winners of the Internet Age. The vast majority of companies of that era failed, as will altcoins of this period in time, but Amazon, after it hit $12 a share, did “Return to the mean”, after several years of consolidation and, yes, boring ranging behavior. If you have not already checked, AMZN is now trading around $1,800 a share today. Does this exercise predict that a “150X” multiple is in Bitcoin’s future?
If this “surge” happens, hopefully, it will not take 18 years to become a reality. Adam Back, CEO of Blockstream, has reached this admission:
Bitcoin has come much further and much faster than people expected. There was a saying in the early dotcom era about ‘Internet time’, and […] bitcoin time […] seems to be moving even faster.