Learning from the Dotcom Bubble: Valuation Criteria for Technology Companies

The dot-com bubble that occurred from the late 20th century to the early 21st century has provided many lessons for today’s cryptocurrency market. During the peak of speculation on internet companies, many investors overlooked a fundamental question — “Does this company truly generate profits?”

What Excessive Expectations for the Internet Revolution Brought

In the late 1990s, expectations for internet technology had reached saturation. Venture capital funds flowed in one after another, and an IPO rush was underway, leading to a significant change in how companies were valued. Even companies that did not generate profits or revenue were highly valued if they had increasing user numbers (referred to as “eyeballs”) and high growth rates.

Media and individual investors were captivated by the narrative of a “new economy,” abandoning traditional business norms. Valuations that disregarded profitability became a symbol of the widespread optimism across the market.

Bubble Burst: The Exposure of Unsustainable Business Models

However, reality changed. As interest rates rose and the market began demanding actual profits, many dot-com companies faced management crises. Companies with unhealthy cost structures and unclear revenue sources were the first to go bankrupt or shut down.

What became clear during the bubble burst was that technological advancement alone does not guarantee a company’s survival. While some large platforms survived, many promising companies disappeared from the market.

What the Dot-com Bubble Teaches the Cryptocurrency Market

The history of the dot-com bubble also serves as an important warning for today’s cryptocurrency market. Even as major cryptocurrencies like BTC, ETH, and BNB attract attention, the criteria for project selection can become ambiguous.

The most important factors in assessing a company’s value are long-term profitability, a healthy cost structure, and the ability to generate real profits. Not all projects succeed just because they involve new technology; the quality of the business model ultimately determines survival. The lessons of the dot-com bubble suggest that in investment decisions, emotional narratives are less important than fundamental analysis.