Morgan Stanley: Bitcoin “Surprisingly Similar” to Dot-Com Bubble, Unfolding 15 Times Faster
Research published by Morgan Stanley recently found that bitcoin is behaving a lot like the Nasdaq did nearly 20 years ago, during the dot-com bubble. The timeline, however, is unfolding 15 times faster than it did then.
Per a note the financial institution sent to its clients, both the Nasdaq in 2000 and bitcoin nowadays rallied between 250 and 280 percent in their most bullish periods. Sheena Shah, a strategist at Morgan Stanley, noted that bitcoin’s rally was 15 times faster than that of Nasdaq in 2000.
Per Shah, both the price moves and volume behavior are similar when compared. The analyst noted that bitcoin lost 45 to 50 percent of its value in a recent bearish wave, just like Nasdaq did 18 years ago.
Shah further noted that the Nasdaq bear market of 2000 had five similar prices declines “averaging a surprisingly similar amount of 44 percent.” Bitcoin recently fell from a $19,200 all-time high in mid-December to $8,530 at press time.
Trading volume, according to Morgan Stanley, is another red flag. The analyst noted that bitcoin’s trade volumes surged 300 percent since December, but keep falling each rally ahead of the bear markets.
“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.”
USDT trading an “interesting development”
There are, however, bitcoin trading developments that weren’t seen during the dot-com bubble. These are, to Morgan Stanley, an “interesting development. Historically bitcoin has been traded in three fiat currencies: the US dollar, the Chinese yuan, and the Japanese yen.
During the recent bear market, Tether (USDT) trading volumes surged. According to data from CryptoCompare, about 15.34 percent of bitcoin trading in the last 24-hour period was done with USDT tokens.
Tether is notably a controversial cryptocurrency. It’s supposed to be pegged to the US dollar 1:1, but some skeptics believe the company issuing them doesn’t actually have any US dollars in the bank to back the 2.2 billion existing USDT tokens.
Commenting on the development, Shah wrote:
“The coin USDT is not a major funding unit but its increasing use is an interesting development. Over the coming years, we think that market focus could turn increasingly towards cross trades between cryptocurrencies/tokens, which would transact via distributed ledgers only and not via the banking system.”
Tether has in the past been subpoenaed by the US Commodity Futures Trading Commission (CFTC). Recently, BitMex researchers found the company may have banking in Puerto Rico.