Meme culture has officially gone mainstream; what could be more mainstream officialdom than the Oval Office?
Elon Musk has once again displayed his unparalleled ability to make pop culture painfully uncool by association, naming his new agency DOGE (Department of Government Efficiency) in a nod to the Shiba Inu meme and its eponymous cryptocurrency. Dogecoin, originally a parody of bitcoin, skyrocketed in value in 2021 thanks to social media hype and celebrity endorsees such as Musk.
Donald Trump is never averse to slapping his name on a trend, and the $Trump memecoin was launched just before his inauguration, peaking at $15 billion before collapsing to $2.7 billion days later. Investors who saw the token as both a show of loyalty and a financial opportunity are now left reeling.
We’ve been here before – the NFT (non-fungible token) boom followed a similar trajectory. In early 2021, a digital artwork by Beeple sold for an eye-watering $69.3 million at Christie’s. Celebrities and brands, Trump among them, rushed to launch NFTs, and prices soared for digital collectibles such as the Bored Ape Yacht Club. Yet by 2022, the market collapsed, and many NFTs that once sold for six or seven figures were essentially worthless.
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In the 1990s, the rise of the internet led investors to pour money into any company with a .com in its name, convinced that the web would transform business overnight. Pets.com raised $300 million in its IPO despite never turning a profit. Many companies spent millions on marketing while failing to generate revenue.
The Nasdaq index, which had peaked in March 2000, lost nearly 78 per cent of its value over two years. Hundreds of internet companies went bankrupt. Trillions of dollars in market value were wiped out, and a recession followed.
However, not all dotcom companies failed. Amazon and eBay survived, and so the internet did revolutionise commerce, just not at the rate that speculators had hoped. The dotcom boom is a textbook example of investor herd mentality. And because bubbles reflect human psychology, history is littered with examples.
The Amsterdam Stock Exchange, founded in 1602 alongside the Dutch East India Company (VOC), was the first formal stock exchange where shares could be freely traded.
Businesses were typically funded through single voyages or short-term partnerships. Investors would pool money for a single trade mission, and once the mission was completed, profits were distributed, and the venture dissolved.
The VOC introduced permanent shares, which meant investors could buy or sell their stakes without waiting for voyages to conclude. This allowed companies to raise large amounts of capital upfront, funding longer-term projects such as military protection for trade routes. It also created a new class of passive investor, who could profit from dividends rather than actively running a business.
Investors no longer had to hold shares indefinitely; they could sell them at a profit (or loss) at any time. This liquidity enabled speculative trading, where merchants and financiers didn’t just invest in companies, but traded stocks for profit based on future value.
By the 1630s, the Netherlands was gripped by an obsession with tulip bulbs, which had become symbols of wealth. Speculators drove the prices of rare bulbs to extraordinary heights, with some reportedly worth the price of an Amsterdam canal house. At the peak, traders exchanged land, livestock and fortunes for tulips, expecting to sell them at even higher prices. But in February 1637, confidence suddenly evaporated, buyers disappeared, and tulip prices collapsed overnight.
The following century, Britain experienced its own market bubble: the South Sea Bubble of 1720. Following the example of the East India Company, the South Sea Company was granted a monopoly on trade with Spanish colonies, leading to speculation that massive profits were imminent.
Investors rushed to buy shares, and the stock price soared from £128 in January to over £1,000 by August. Alongside the speculation came a range of ambitious start-ups, including one to develop “a project of great importance, but nobody to know what it is”. Inevitably, by autumn, the bubble had burst.
Despite the differences between tulips, stocks, website and crypto, bubbles follow similar patterns. Herd behaviour drives investors to follow the crowd, assuming rising prices mean an asset must be valuable. Investors assume they can sell to someone else at a higher price, regardless of actual value. Eventually, the chain runs out, and prices collapse.
Bubbles are also fuelled by compelling narratives. Tulip mania thrived on the exoticism of tulips, the South Sea Bubble on imperial trade fantasies, and the dotcom boom on the myth of overnight digital transformation.
Economist Robert Shiller describes bubbles as social epidemics – viral stories that spread irrational optimism until reality intervenes. In every case, the warning signs were there, but few wanted to listen while someone was still willing to speculate.
Stuart Mathieson is research manager with InterTradeIreland
