Bitcoin and ether, the top two tokens by market valuation, fell below $26,000 and $2,000, respectively, in the cryptocurrency market on Thursday. Billionaire Mark Cuban compares the drop to the dot-com bubble in the early 2000s, which occurred during the same period as markets were pounded with inflation fears.
Speculative investing in the late 1990s caused internet-based company valuations to skyrocket, sending the Nasdaq Composite stock market index up 400 % in five years before collapsing in 2001 and 2002.
Currently, "crypto is going through the lull that the internet went through," Cuban tweeted on Monday, as per a report from CNBC.
However, hot all companies are the same. In the crypto arena, Cuban expects the winning players to be those that "use smart contracts to improve business productivity and profitability," as per Yahoo! Finance.
"If you don't want to pick individual winners and losers in the crypto world, you can still get exposure to the space through ETFs," he noted.
Crypto Enters A Crucial Phase
Cuban, the owner of the Dallas Mavericks, said crypto is entering an "imitation phase" where too many companies are failing to offer fresh utility to the market "after the initial surge of exciting apps" and NFTs, or nonfungible tokens.
I'm old enough to remember when "sophisticated" investors invested in internet sites based on "hits". A "hit" is the display of any file. So sites loaded up tiny, invisible files and bragged about how many hits they got. People dismissed the net just like they are crypto.
— Mark Cuban (@mcuban) May 31, 2022
But, as per Cuban, the blockchains that will emerge from the lull will be those that use "smart contracts" to boost corporate productivity and profitability rather than those that aren't.
Smart contracts are digital agreements that are programmed and kept on the blockchain and are used to enable decentralized finance (Defi) apps and non-financial transactions (NFTs), as well as to construct decentralized autonomous organizations (DAOs).
"The chains that copy what everyone else has, will fail," Cuban tweeted, adding that there is not necessary to have "NFTs or DeFi on every chain."
He likened it to the dot-com boom of the 2000s, when internet firms acted similarly, selling knockoff products and promised high profits before the bubble burst.
In an interview with Fortune in May, Cuban said a "consolidation phase" would follow, in which copycat blockchains would die out. Rather than dying, some blockchains will be "acquired" or merged.
He believes the biggest opportunity for crypto firms and blockchains is how smart contracts, or collections of code that execute a set of instructions on the blockchain, are used. Businesses that employ smart contracts to boost efficiency and profits will have a competitive advantage, according to Cuban.
"The chains that realize this will survive," he said.
Learn From History
Despite the movements in the market, Cuban advises not to dismiss cryptocurrencies like what happened in the past.
"I'm old enough to remember when "sophisticated" investors invested in internet sites based on "hits." A "hit" is the display of any file. So sites loaded up tiny, invisible files and bragged about how many hits they got. People dismissed the net just like they are crypto," he posted on Twitter.
Cuban amassed his fortune in the 1990s, when the internet was still in its infancy, first through the sale of his computer consulting firm MicroSolutions and then with the acquisition of his online radio company Broadcast.com by Yahoo for $5.7 billion in shares. With a broad portfolio of blockchain-related companies and cryptocurrencies, he now primarily invests in the crypto market.
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