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Worried about the crypto bubble bursting? It’s time to zoom out

Investors concerned about the apparent ‘bursting’ of the crypto bubble need to zoom out from short-term pain and look at past experiences of fast-moving technological markets. 

Who remembers Lycos? A darling of the tech bubble of the early 2000s, it is now consigned to little more than a footnote in the history of the internet. 

The firm sold for an astonishing (at the time) $12.5 billion at the height of the Dotcom bubble to a Spanish internet company – coincidentally named – Terra Networks.  

Just four years later Terra Networks sold Lycos to a South Korean firm called Daum Communications for $95 million – a more than 99% loss on its initial investment, reminiscent of some of the worst-hit crypto assets in the current market.

Some 10 years later Lycos was again sold, for just $36 million, to an Indian marketing company called Ybrant Digital.

It would be pretty easy to replicate this story with any number of firms which made it big during the Dotcom boom, only to wash away in the tides of investment history in due course. Just think Ask Jeeves,, Webvan and many others.

But some participants of the bubble survived – most notably Google and Amazon. And we know where those guys ended up. 

It seems little-remarked too that the current market environment bears much technical resemblance to the Dotcom bust. Facile comparisons with 2008/09 don’t interpret what is happening correctly because they misconstrue the crypto crash as a financial failure, and not one of technological ideas being stress tested. 

The Dotcom bubble is more apt – low interest rates and easy capital in the late nineties fuelled capital flows into riskier assets. In 2000, the Federal Reserve began a cycle of rate hikes, which squeezed investors’ appetite for the riskier firms in the market, draining capital and killing the more fragile projects. Sound familiar?

What is happening to crypto, and tech assets more widely right now, is no different. What matters for crypto is who is going to be the Google, who the Amazon, and who’s going to be Lycos.

When the cheap money is vacuumed away, what you’re left with is the resilient ideas. So, while this makes the serious adversity in markets a painful episode for many - especially those who lose jobs or see their ideas fail - essentially what is happening here is a shaking out of unviable projects.

If anything, the situation presents significant opportunities to firms who are well-positioned, robustly regulated and capitalised, to move into the space vacated by other less well-prepared firms. 

What’s more, dig through the apocalyptic headlines and there is a powerful undercurrent of ongoing investment, project and idea generation in the crypto sector. 

Take for instance JP Morgan’s move into DeFi which is looking to leverage the yield-generating possibilities of the sector, and the potential for the tokenisation of traditional assets.

Or perhaps the EVM scaling mechanism Aurora, which recently launched a $90 million fund to help finance DeFi apps on the Near Protocol. While not the biggest fund launch ever, it is indicative what the smart, quiet money is doing. 

Spend long enough looking at what is going on underneath the market distress and you’ll find plenty more of these examples. What these quiet capital moves indicate is that crypto is still more than the sum of its market cap or its token trading values. 

So, what does the next six months to a year look like for crypto? The shake out will continue. Big fish will absorb smaller ones and some of it will be a success while others will fail. 

Crypto is ultimately about building a new digital and decentralised financial infrastructure for the world. That idea hasn’t disappeared or devalued - it’s just having to work harder to reach its stated goals. 

Instead of focusing on the here and now – look at where things will be in 10 years. 

A decade ago, crypto was practically nowhere. People bought pizzas with bitcoin. A year ago, it was the shiny new world of Web3, the metaverse and NFTs. Today it’s going through major ruminations as investors and innovators figure out what fair value is for those ideas. 

In 10 years’ time the landscape will be totally different again. This isn’t the end for crypto in the same way as the dotcom bubble wasn’t the end for Google or Amazon. The challenge for the industry is to not become a Lycos by developing sustainable long term businesses. 


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Philipp Pieper

Philipp Pieper


Swarm Markets GmbH

Member since

16 Mar 2022



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