A Growing Bubble: The Blockchain Name Rush
on February 9, 2018
As companies add “blockchain” to their name to boost their share price, it’s difficult to avoid comparing cryptocurrencies in 2018 to the dotcom bubble at the turn of the century. Though cryptocurrencies are plummeting alongside the stock market, the vast majority of companies who have made this nominal change have seen huge gains. Many of these “blockchain bandwagoners” aren’t clear on how or if they use the technology, and many are in industries that are completely unrelated.
Regulators are cracking down on cryptocurrencies around the globe, part of the reason for the recent dip. U.S. regulators also suspended UBI Blockchain last month, citing “unexplained” market activity. Until the suspension, UBI Blockchain shares rose 1,000% after changing their name. The signs of a bubble are growing, and comparisons to the dotcom years aren’t unfounded.
While the cryptocurrency market itself rises and falls dramatically, analysts call it a bubble due to the large number of eager buyers and minimal returns in the short-term. How much of this desire to invest comes from the use of “blockchain” in their name? A study in 2001 showed that nearly all the companies that added a web domain like “.com” to their corporate appellation, saw a share price jump of 74%. But if the crypto craze fades, modern day companies can take another hint from earlier bubbles. A second study in 2002 found that shares jumped almost as much when the same companies that added “.com” to their name later removed it.
While the signs all seem to point in a specific direction, the jury is still out. Is a bubble really growing around blockchain tech?