The similarity between dot.com bubble and Bitcoin is surprisingly high

The Nasdaq in 2000 and modern-day bitcoin both rallied 250 to 280 percent in their most "exuberant" periods ahead of bear markets. "Just that the bitcoin rally was around 15 times the speed.

These price moves and similar behavior in trading volume could be signs that Nasdaq history is repeating itself.Bear markets for the digital currency are not new. Since it was created in 2009, bitcoin has seen four of them, with price drops between 28 percent and 92 percent. Bitcoin's value has fallen roughly 70 percent from its peak near $20,000 in December to a low in February below $7,000.

On average, bitcoin prices have lost 45 percent to 50 percent of their value in each bearish wave. "The Nasdaq's bear market from 2000 had five price declines, averaging a surprisingly similar amount of 44 percent." said Sheena Shah from Morgan Stanley.

Trading volume could be another red flag. Since December, bitcoin trade volumes have jumped nearly 300 percent. But each rally ahead of the bear markets saw volumes fall.

"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."

Morgan Stanley pointed out changes in bitcoin trading that are not correlated to Nasdaq trends but could be "an interesting development."

Source: Bloomberg Pro Terminal

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