Powered by momentummedia
nestegg logo
Powered by momentummedia
nestegg logo
nestegg logo

Invest

Is this a repeat of 2000? Crypto, Reddit craze fuelling next bubble

  • July 29 2021
  • Share

Invest

Is this a repeat of 2000? Crypto, Reddit craze fuelling next bubble

By Cameron Micallef
July 29 2021

As younger investors continue to turn to crypto assets and alternative news sources such as social media, some experts are suggesting we’re back to trends that led to the dotcom market crash.

Is this a repeat of 2000? Crypto, Reddit craze fuelling next bubble

Is this a repeat of 2000? Crypto, Reddit craze fuelling next bubble

author image
  • July 29 2021
  • Share

As younger investors continue to turn to crypto assets and alternative news sources such as social media, some experts are suggesting we’re back to trends that led to the dotcom market crash.

Is this a repeat of 2000? Crypto, Reddit craze fuelling next bubble

Fund manager Liam Nunn believes the current market is looking very similar to a market fall just two decades earlier.

The dotcom crash, or the rise and fall of technology stocks between 1995 and 2001, saw the growth of internet-crazed stocks, with investors pouring money into businesses with no track record of profits.

While certain companies went on to change the world, including Microsoft, many of these early adapters to the internet failed to capture the required market share, going bankrupt and sending the market into a spin.

Advertisement
Advertisement

Fast forward two decades, Mr Nunn cautioned investors that the same sense of ‘crazy’ euphoria that sparked the tech bubble could be happening again.

“Personally, I think [the market] is more similar to the tech bubble than people would like to acknowledge,” he said.

Back in 2000, the main driver for a tech bubble was not the memorable companies that crashed, but instead strong core businesses with investors chasing similar returns in other less profitable companies, Mr Nunn said.

“I think it’s surprising when people think that the FAANG’s (Facebook, Amazon, Apple, Netflix, Google) having attractive fundamentals makes it different from the tech bubble,” he explained.

“The top 10 largest tech stocks in January 2000, they were good businesses.”

However, when investors look back on the tech bubble, they remember purchasing IPOs based on fundamentals other than whether or not the business was profitable or had cash flow to survive.

“The truth is market indices, the tech indices, were driven by genuinely high-quality businesses.”

“The crazier side of the tech boom, that was the circus sideshow, but it was the high quality that was driving the market,” he said.

Drawing a parallel between 1999-2000 and today, the investor highlighted the same ‘circus sideshow’ where investors were still in peak buying phase, prior to the bubble popping.

“It’s not impossible to say the same thing could be happening today. We are not short of circus sideshows craziness to rival the Pets.com of 1999-2000.

“You’ve got cryptocurrency mania left, right and centre, you’ve got the Reddit retail trading phenomenon and you have Tesla at something crazy, that is larger than the entire global automotive industry,” he said.

Pointing out that in hindsight these trends are easier to spot, Mr Nunn said it can be messier to spot the trend while living through it.

“But I don’t think we are short of any of the craziness of the tech bubble,” Mr Nunn concluded.

Is this a repeat of 2000? Crypto, Reddit craze fuelling next bubble
Is this a repeat of 2000? Crypto, Reddit craze fuelling next bubble
nestegg logo

Forward this article to a friend. Follow us on Linkedin. Join us on Facebook. Find us on Twitter for the latest updates
Rate the article

About the author

author image

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

author image
Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

more on this topic

more on this topic

More articles

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.