Morgan Stanley: Bitcoin bubble unfolding at a faster pace than dot-com bubble
It is often discussed how the Nasdaq is performing just like it did at the height of the dot-com bubble. Companies are unprofitable, IPOs are being filed, and money-printing in still seeping into the stock market (SEE: Dot-Com Bubble Era Returns: 71% of IPO companies were unprofitable in 2014).
But one financial institution thinks there is another major asset that is behaving in the same manner as the dot-com bubble in the 1990s: bitcoin.
According to a new report by Morgan Stanley, bitcoin is trading in a similar fashion as the Nasdaq in 20 years ago, but the key difference is that the peer-to-peer decentralized virtual currency is unfolding at a faster pace.
Despite its meteoric rice in recent years, the digital currency has endured four bear markets as price declines have ranged from 20 to 92 percent. Since bitcoin reach an all-time high of $19,000 a few months ago, it has cratered roughly 70 percent.
“Just that the bitcoin rally was around 15 times the speed,” Sheena Shah, strategist at Morgan Stanley, said in an interview with CNBC. “The Nasdaq’s bear market from 2000 had five price declines, averaging a surprisingly similar amount of 44 percent.“The follow-up rally for both bitcoin and the Nasdaq always saw falling trading volumes. Rising trade volumes are thus not an indication of more investor activity but instead a rush to get out.”
The dot-com bubble eradicated a lot of wealth and sent investment portfolios tumbling. Like the traders back then usually uttered, bitcoiners today say the same thing: it’s different this time!
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