Widely-followed crypto analyst Benjamin Cowen says the dot-com bubble in the late 1990s is giving a glimpse of what the bottom could look like for the crypto market.
“If you look at what happened with the Nasdaq back in the year 2000, you can see that it actually corrected about 83%. This is an 83% correction. Now, for people who don’t like the idea of crypto correcting or they don’t think that it can happen, I assure you it can happen and it seems to happen every few years.”
Cowen says that an 80% drop is highly possible for crypto.
“You’ll see an 80% correction, so let’s first not assume that it can’t happen considering that it’s already happened in the cryptocurrency asset class multiple times. The Nasdaq crashed 83% before ultimately finding a macro bottom and then going on another run and then we had the financial crisis of course which led us to another bottom… Remember, during the dot-com crash, there were still several bounces in between that made it seem like it was a bottom, but it actually, in fact, was not.”
At time of writing, the global crypto market cap is $1.24 trillion, but if the worst-case scenario happens, Cowen says that the valuation of the new asset class could drop to $500 billion.
“Remember that Nasdaq 83% dropped from the top, 83% and it dropped from around $3 trillion. Now, where would that put the entire asset class? That would put the asset class at around a $500 billion market capitalization.
Sometimes I struggle to comprehend an asset class that has only a market cap of $500 billion, but considering that the asset class as a whole was $3 trillion not that long ago and we’re currently at $1.26 trillion, it’s not that far-fetched to assume that we can’t drop another 40% or so down to approximately $500 billion. I would consider that to be the absolute worst-case scenario.”