CRYPTO TREYSI

The dot-com bubble

Let's continue our breakdown of the financial crises with the dot-com bubble, how investors literally went crazy because of the internet.

The Internet has a deep and interesting history. It began as a military and purely scientific development, and with the proliferation of personal computers it entered the big world. And by the '90s it was spreading like a virus, so handy was it. In 1995, 40 million people were connected to the Internet; by 2000, 400 million were, and by 2005, 1 billion were.

Of course, businesses and investors were very attracted to the Internet, and it really blew their minds. Various Internet companies sprang up like mushrooms after the rain - Elon Musk started with an Internet service provider Zip2 in 1995, Sergey Brin and Larry Page's Google was born in 1998, and in Russia it was Rambler in 1996 and Yandex in 1997. Search engines, maps, directories, forums and so on. The young companies promised investors that they would completely change the world (and on the whole, they did not lie), for which they received fabulous money.

Internet companies entered the stock market and immediately began to grow by hundreds of percent a year. The investors - most of whom were ordinary people without millions in their accounts - invested their money and rubbed their hands together in anticipation of a good old age. It would seem that the Japanese real estate crisis had only recently hit, there was already the Great Depression, the energy crisis of the 70s, but people sincerely believed that this time it would be different.

For a successful IPO, all the company had to do was add ".com" to its name, which in English sounds like "dot-com". Everybody thought it was another Internet company and ran to invest in it. A business plan? A model? Financial statements? Profits? Who needs it anyway! Bring in the cache and you'll get several times as much. That approach gave the NASDAQ index a 500% increase from 1995-2000.

Of course, the growth of the dot-com bubble was actively helped by the media. They saw the growth of Internet companies and actively trumpeted it - thereby enticing new players to inflate the bubble even more. Yes, there were plenty of innovative companies offering good business solutions, but there were also plenty of those who had nothing, but their shares were worth a lot. Sooner or later the bubble had to burst and it did on 10 March 2000.

We cannot say that any particular event caused the bubble to burst on that date, but rather a confluence of factors. In 1999, inflation began to rise in the United States and the Federal Reserve (Central Bank) began to raise its key rate, raising it from 4.75% to 6.5% in one year. By early 2000, credit became noticeably more expensive than it had been at the dawn of the dot-com boom. Investors and traders began to lose interest in Internet companies - and things took a sharp downturn. On March 10, 2000, the NASDAQ Composite reached a record 5132.52 points in the afternoon, but had already fallen 1.5 times by the end of trading.

The steep peak to the bottom began. Shares fell and fell every day, investors went bankrupt and companies closed. Only those who were really serious businesses survived. The index fell for the next 30 months, bottomed out at about 1,100 points, a 5-fold drop. It took NASDAQ a full 15 years to recover to 5,000 points.

The passion of investors for innovation died out, and the word "dotcom" became a dirty word, meaning an incomprehensible company demanding a lot of money for something "brand new". However, this stock market crash did not stop the development of the internet; it was still actively penetrating our reality. And let's be honest - we can no longer imagine life without it. Personally, I can't.

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