Two Booms, Two Busts: How Bitcoin Is Following In The NASDAQ’s Footsteps

Yesterday at TechCrunch Disrupt we hosted a panel discussing Bitcoin (a recap can be found here). During the course of that discussion, I noticed something interesting: The former boom in the price of Bitcoin, and its ensuing refractory period, is quite similar to the NASDAQ’s infamous boom in the late ’90s.

For fun, we’ve taken a graph of each, and stacked them on top of each other, which you can see below:

(Obviously, we set up this chart to make a point: Comments complaining about how we tweaked it will be ignored.)

What can get from this? That booms are – at least in some cases – quite similar. The security here doesn’t really matter, in this case public stock against a digital cryptocurrency. It’s quite interesting to see that what is being traded matters less than the market sentiment that surrounds it.

There is a long, slow, measured, low-VIX period (a period of limited volatility), followed by a crazed shot to heights. A sharp correction ensues, the market tests new support levels, and, following, a slow incline is established.

Or, in other words, Bitcoin is behaving in incredibly normal ways – even though it is something of a wild new form of financial instrument. For fun, mentally compare the all-but-hilarious hype that surrounded Bitcoin when it broke the $200 mark, and the silly market situation that allowed the NASDAQ to reach its peak prices. It’s the same substance: Lack of perspective combined with Fear of Missing Out.

Whatever the case, Bitcoin’s history is not too tumultuous. In fact, it’s anything but: This is what we should have expected. Now, what’s next?

Top Image Credit: Jo Jakeman