Popular Bitcoin Developer Jimmy Song thinks a lot of investors may be about to pull the plug on their Ethereum investments and he’s drawn a parallel to the crash Yahoo faced back in the 90s.
In 1994 and 1995 a huge amount of money flowed into the tech industry. The early days of the internet were extremely exciting for investors who cashed in on the rush, but the crash that followed left many of these tech companies with values 90% lower than before the bubble burst.
Song compares the rise and fall of Yahoo to what Ethereum is currently going through.
“They were part of that whole dot-com bubble, they had a crazy valuation at some point,” Song said of Yahoo.
“They were known as a portal and a search engine and they had all these startups that were pouring money into yahoo just to advertise on their front page.”
The hype of the product was beyond their financial output but the sheer amount of startups coming onto the scene in the tech world.
“The advertising rates were ridiculously high. What caused the yahoo valuation to be so high was in large part because of those advertising rates. And those advertising rates were only there because there were so many startups trying to get their brand out there.”
Song says that should sound familiar because it’s very similar to what’s been happening with Ethereum. According to Song, Ethereum rode the ICO craze to a price above $1400 and now the value is sinking as the craze dies down. The price may be slowing now because Ethereum provides value as a platform and the ICOs based on that platform haven’t done much in terms of use and adoption.
He also highlighted the low entry barrier for ICOs. The cost of creating an ERC20 token is extremely low so ICOs will continue to pop up, but investors are now backing off projects that aren’t delivering working products.
Ultimately, Song thinks the ETH price will continue to sink. “A lot of people will come out of it because the ICO bubble popped.” If the actual use and adoption of these tokens don’t pick up, the price of ETH may take a while to recover.
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