Map of a Downturn

I’ve worked in tech since 2010, just after the great recession, and pretty much the whole time people have been publishing articles warning that there was a tech bubble just about to burst. This sort of doomsaying got a lot quieter over the past few years, which perhaps in retrospect was telling. Now, the long-awaited tech correction might actually be happening. 

The combination of events we’ve seen over the past few months is the most serious situation I’ve seen in my career so far. So what we’re going to do today is walk through all the data points that matter, and try to make sense of how they all fit together in a causal web. By the end you’ll have a good picture of what’s happening and how it all connects.

Let’s start by going over the data.

What is happening?

1. Stocks are down

Particularly tech stocks:

Jason Goepfert@jasongoepfert

Internal Nasdaq damage:

😒More than 45% of stocks down 50%
😢More than 22% of stocks down 75%
🤬More than 5% of stocks down 90%.

The only comparisons are Oct 2000 - Oct '02 and Nov 2008 - Apr '09.

April 29th 2022, 9:01am EST

1k Retweets4k Likes

I wrote about this back in March but it’s only gotten worse since then. The companies that got hit the hardest seem to be newer, high-growth tech companies that once had sky-high revenue multiples: Zoom, Shopify, Roblox, Peloton (who I am still particularly long-term bullish on), Twilio, Snowflake, Coinbase, and many other have lost the majority of their value over the past few months.

Most of these still have solid underlying businesses, but people are beginning to question whether it ever actually made sense to pay 50x sales.

Bill Gurley@bgurley

Replying to @bgurley

1) Previous "all-time" highs are completely irrelevant. It's not "cheap" because it is down 70%. Forget those prices happened.
2) Valuation multiples are always a hack proxy. Dangerous to use. If you insist, 10X should be considered AMAZING and an upper limit. Over that silly.

April 29th 2022, 1:44pm EST

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Daniel Toloko@daniel_toloko

April 28th 2022, 8:30pm EST

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2. Cryptocurrencies are down

Did you think Bitcoin and Ethereum were supposed to be uncorrelated with public stock markets? Did you think with fears of inflation at an all time high people should be running to deflationary assets with a long-term capped supply?

If you did, I don’t blame you. But you were wrong:

Bitcoin peaked in November, same time as tech stocks, just short of $69k. Ethereum peaked that same month shortly after it passed $4,200. (You can’t make this up.) Now both are down 42% and 44%, respectively.

3. NFT sales are (probably) down

There was a big article in the WSJ this week asking “is this the beginning of the end for NFTs?” The NFT community hated it, and argues the data is “fake” and shouldn’t count the implosion of Axie Infinity, which I predicted in December.

There was a lot of back and forth on Twitter, with curated data from both sides supporting and rejecting the conclusion that NFT sales are flatlining, so let’s just say this one is a question mark for now.