.com Bubble

The dotcom bubble lasted about two years between 1998 and 2000. The time between 1995 and 1997 is considered to be the pre-bubble period when things started to heat up in the industry."}},{"@type": "Question","name": "Why Did the Dotcom Bubble Burst?","acceptedAnswer": {"@type": "Answer","text": "The dotcom bubble burst when capital began to dry up. In the years preceding the bubble, record-low interest rates, the adoption of the Internet, and interest in technology companies allowed capital to flow freely, especially to startup companies that had no track record of success. Valuations rose and money eventually dried up. This led companies, many of which didn't even have a business plan or product, to collapse, causing the market to crash."}},{"@type": "Question","name": "What Caused the Dotcom Crash?","acceptedAnswer": {"@type": "Answer","text": "The dotcom crash was triggered by the rise and fall of technology stocks. The growth of the Internet created a buzz among investors, who were quick to pour money into startup companies. These companies were able to raise enough money to go public without a business plan, product, or track record of profits. These companies quickly ran through their cash, which caused them to go under."}},{"@type": "Question","name": "What Caused the 2000 Stock Market Crash?","acceptedAnswer": {"@type": "Answer","text": "The 2000 stock market crash was a direct result of the bursting of the dotcom bubble. It popped when a majority of the technology startups that raised money and went public folded when capital went dry."}}]}]}] Investing Stocks Bonds ETFs Options and Derivatives Commodities Trading FinTech and Automated Investing Brokers Fundamental Analysis Technical Analysis Markets View All Simulator Login / Portfolio Trade Research My Games Leaderboard Banking Savings Accounts Certificates of Deposit (CDs) Money Market Accounts Checking Accounts View All Personal Finance Budgeting and Saving Personal Loans Insurance Mortgages Credit and Debt Student Loans Taxes Credit Cards Financial Literacy Retirement View All News Markets Companies Earnings CD Rates Mortgage Rates Economy Government Crypto ETFs Personal Finance View All Reviews Best Online Brokers Best Savings Rates Best CD Rates Best Life Insurance Best Personal Loans Best Mortgage Rates Best Money Market Accounts Best Auto Loan Rates Best Credit Repair Companies Best Credit Cards View All Academy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All TradeSearchSearchPlease fill out this field.SearchSearchPlease fill out this field.InvestingInvesting Stocks Bonds ETFs Options and Derivatives Commodities Trading FinTech and Automated Investing Brokers Fundamental Analysis Technical Analysis Markets View All SimulatorSimulator Login / Portfolio Trade Research My Games Leaderboard BankingBanking Savings Accounts Certificates of Deposit (CDs) Money Market Accounts Checking Accounts View All Personal FinancePersonal Finance Budgeting and Saving Personal Loans Insurance Mortgages Credit and Debt Student Loans Taxes Credit Cards Financial Literacy Retirement View All NewsNews Markets Companies Earnings CD Rates Mortgage Rates Economy Government Crypto ETFs Personal Finance View All ReviewsReviews Best Online Brokers Best Savings Rates Best CD Rates Best Life Insurance Best Personal Loans Best Mortgage Rates Best Money Market Accounts Best Auto Loan Rates Best Credit Repair Companies Best Credit Cards View All AcademyAcademy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All EconomyEconomy Government and Policy Monetary Policy Fiscal Policy Economics View All Financial Terms Newsletter About Us Follow Us Table of ContentsExpandTable of ContentsWhat Was the Dotcom Bubble?Understanding the Dotcom BubbleHow the Dotcom Bubble BurstFAQsThe Bottom LineEconomyEconomicsDotcom Bubble DefinitionBy

The dotcom bubble burst when capital began to dry up. In the years preceding the bubble, record-low interest rates, the adoption of the Internet, and interest in technology companies allowed capital to flow freely, especially to startup companies that had no track record of success. Valuations rose and money eventually dried up. This led companies, many of which didn't even have a business plan or product, to collapse, causing the market to crash.

.com Bubble

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The 2000 stock market crash was a direct result of the bursting of the dotcom bubble. It popped when a majority of the technology startups that raised money and went public folded when capital went dry.

The dot-com bubble (or dot-com boom) was a stock market bubble in the late 1990s. The period coincided with massive growth in Internet adoption, a proliferation of available venture capital, and the rapid growth of valuations in new dot-com startups.

During the dot-com crash, many online shopping companies, notably Pets.com, Webvan, and Boo.com, as well as several communication companies, such as Worldcom, NorthPoint Communications, and Global Crossing, failed and shut down.[1][2] Others, like Lastminute.com, MP3.com and PeopleSound, survived the burst but were acquired. Larger companies like Amazon and Cisco Systems lost large portions of their market capitalization, with Cisco losing 80% of its stock value.[2][3]

In 2000, the dot-com bubble burst, and many dot-com startups went out of business after burning through their venture capital and failing to become profitable.[5] However, many others, particularly online retailers like eBay and Amazon, blossomed and became highly profitable.[6][7] More conventional retailers found online merchandising to be a profitable additional source of revenue. While some online entertainment and news outlets failed when their seed capital ran out, others persisted and eventually became economically self-sufficient. Traditional media outlets (newspaper publishers, broadcasters and cablecasters in particular) also found the Web to be a useful and profitable additional channel for content distribution, and an additional means to generate advertising revenue. The sites that survived and eventually prospered after the bubble burst had two things in common: a sound business plan, and a niche in the marketplace that was, if not unique, particularly well-defined and well-served.

The dot-com bubble burst in March 2000, with the technology heavy NASDAQ Composite index peaking at 5,048.62 on March 10[13] (5,132.52 intraday), more than double its value just a year before. By 2001, the bubble's deflation was running full speed. A majority of the dot-coms had ceased trading, after having burnt through their venture capital and IPO capital, often without ever making a profit. But despite this, the Internet continues to grow, driven by commerce, ever greater amounts of online information, knowledge, social networking and access by mobile devices.

In the five years after the American Telecommunications Act of 1996 went into effect, telecommunications equipment companies invested more than $500 billion, mostly financed with debt, into laying fiber optic cable, adding new switches, and building wireless networks.[19] In many areas, such as the Dulles Technology Corridor in Virginia, governments funded technology infrastructure and created favorable business and tax law to encourage companies to expand.[31] The growth in capacity vastly outstripped the growth in demand.[19] Spectrum auctions for 3G in the United Kingdom in April 2000, led by Chancellor of the Exchequer Gordon Brown, raised 22.5 billion.[32] In Germany, in August 2000, the auctions raised 30 billion.[33][34] A 3G spectrum auction in the United States in 1999 had to be re-run when the winners defaulted on their bids of $4 billion. The re-auction netted 10% of the original sales prices.[35][36] When financing became hard to find as the bubble burst, the high debt ratios of these companies led to bankruptcy.[37] Bond investors recovered just over 20% of their investments.[38] However, several telecom executives sold stock before the crash including Philip Anschutz, who reaped $1.9 billion, Joseph Nacchio, who reaped $248 million, and Gary Winnick, who sold $748 million worth of shares.[39]

Meanwhile, Alan Greenspan, then Chair of the Federal Reserve, raised interest rates several times; these actions were believed by many to have caused the bursting of the dot-com bubble. According to Paul Krugman, however, "he didn't raise interest rates to curb the market's enthusiasm; he didn't even seek to impose margin requirements on stock market investors. Instead, [it is alleged] he waited until the bubble burst, as it did in 2000, then tried to clean up the mess afterward".[45] Finance author and commentator E. Ray Canterbery agreed with Krugman's criticism.[46]

On Friday, April 14, 2000, the Nasdaq Composite index fell 9%, ending a week in which it fell 25%. Investors were forced to sell stocks ahead of Tax Day, the due date to pay taxes on gains realized in the previous year.[55] By June 2000, dot-com companies were forced to reevaluate their spending on advertising campaigns.[56] On November 9, 2000, Pets.com, a much-hyped company that had backing from Amazon.com, went out of business only nine months after completing its IPO.[57][58] By that time, most Internet stocks had declined in value by 75% from their highs, wiping out $1.755 trillion in value.[59] In January 2001, just three dot-com companies bought advertising spots during Super Bowl XXXV.[60] The September 11 attacks accelerated the stock-market drop.[61] Investor confidence was further eroded by several accounting scandals and the resulting bankruptcies, including the Enron scandal in October 2001, the WorldCom scandal in June 2002,[62] and the Adelphia Communications Corporation scandal in July 2002.[63] 17dc91bb1f