Cryptocurrency, the Dot-Com Bubble, and the Problem of Belief Without Substance

By Cliff Potts, CSO, and Editor-in-Chief of WPS News

Baybay City, Leyte, Philippines — April 11, 2026

Cryptocurrency promoters have spent years telling the public that digital coins represent the future of money. They talk about liberation, decentralization, innovation, and a new financial order. Fine. That is the sales pitch. But the harder question is the one ordinary people keep asking: what, exactly, is underneath most of this? For many crypto-assets, the answer is not much beyond code, scarcity claims, and the expectation that somebody else will buy later at a higher price. Federal Reserve Governor Christopher Waller said it plainly in 2023: if people believe an asset can be sold later at a positive price, it can trade positively today; if not, its price can go to zero. The IMF has likewise described many unbacked crypto-assets as highly volatile, of little intrinsic value, and poorly suited to serve as money (Bains et al., 2022; Waller, 2023).

That criticism matters because words like “innovation” and “future” can hide a simpler reality. Gold is tangible. Copper is tangible. Silver is tangible. They can be held, repurposed, melted down, used in industry, and valued outside a speculative market. Their price can rise and fall, but they are not purely dependent on hype for their existence as useful objects. Most crypto-assets do not have that kind of foundation. Their defenders often answer that all money depends on belief to some extent. That is partly true, but it also dodges the point. State-backed currency rests on taxation, law, wages, contracts, courts, and institutional force. Most crypto-assets rest mainly on market sentiment, online narratives, and the hope of resale (Bains et al., 2022; Waller, 2023).

Substance Is Not the Same Thing as Scarcity

One of the most common crypto arguments is that scarcity creates value. Bitcoin, for example, is promoted as rare by design. That may be true within its own rules, but scarcity alone does not create durable worth. Plenty of scarce things are still economically marginal, socially unnecessary, or wildly overpriced. Scarcity can help push up price. It does not answer the deeper question of what remains when the crowd gets bored, scared, or broke. That is the weakness in the entire pitch. Scarcity is being used as a substitute for substance.

Waller’s formulation is still the cleanest one. If people believe an asset can be sold later at a positive price, it can trade positively today. If they stop believing that, the price can go to zero. That is not a description of stable money. That is a description of speculative demand. The IMF’s work on unbacked crypto-assets points in the same direction, noting that many such assets are poor stores of value, poor units of account, and poor media of exchange, while behaving more like speculative investments (Bains et al., 2022; Waller, 2023).

The Dot-Com Bubble Is the Better Example

For a modern audience, the dot-com bubble is the cleaner comparison. The internet was real. That is important. It turned out to be world-changing. But the existence of a real technology did not prevent a speculative bubble from forming around it. During the late 1990s, money flooded into internet companies with weak business models, little profit, and in many cases no serious path to profitability. That did not make the internet fake. It made the valuations irrational.

Britannica notes that when the dot-com bubble burst, the Nasdaq fell from 5,048 in March 2000 to 1,139 in October 2002, erasing nearly all of its bubble-era gains. Britannica also notes that many dot-com firms lost funding and failed, while some survivors later became dominant companies. That is the key point. A real technology can survive while the hype built around it burns to the ground (Encyclopaedia Britannica, n.d.).

That is exactly why the dot-com example belongs in any serious crypto discussion. The existence of blockchain technology does not prove that every token, coin, exchange, or speculative ecosystem attached to it deserves its price. A real innovation can become a delivery system for absurd valuations. In fact, that is often how bubbles work. Real innovations make bubbles easier to sell because they provide a kernel of truth around which fantasy can gather. The internet survived the dot-com crash because it had durable practical uses. A large number of dot-com companies did not survive because their pricing and their business models were nonsense. Crypto deserves the same distinction. A technology may persist. That does not rescue every asset tied to it from the possibility of collapse (Encyclopaedia Britannica, n.d.).

Not a Ponzi Scheme, but Still Dangerous

This point needs precision. The dot-com bubble should not be called a Ponzi scheme. That term has a specific meaning. A Ponzi scheme is an investment scam in which supposed returns to existing investors are paid from funds contributed by new investors. That is not the same thing as a speculative bubble, even though both involve dangerous illusions and a rush of later money. Calling the dot-com bubble a Ponzi scheme would be sloppy and easy for critics to knock down. Calling it a mania driven by hype, weak fundamentals, and rising prices detached from underlying strength is much more accurate.

That distinction matters because crypto criticism should be sharp, not lazy. There have been outright frauds in the crypto world. There have also been speculative assets that were not literal Ponzi schemes but still operated in ways that depended heavily on social momentum and the arrival of later buyers. Those are not the same thing, and serious criticism should know the difference. But in practical terms, ordinary people can still understand the risk: when price depends more on fresh enthusiasm than on durable substance, things can fall apart with brutal speed.

The Graveyard Problem

There is another problem with the crypto story, and it may be the most important one of all: the graveyard is right there in the open. You do not have to guess. You do not have to speculate. You can go into the records, look at the trading histories, and see that token after token either collapsed to a tiny fraction of its former price, drifted into negligible volume, or simply stopped trading altogether. CoinGecko reported in January 2026 that of more than 25.2 million cryptocurrencies listed on GeckoTerminal, about 13.4 million had stopped trading and were considered failed. That is not a healthy ecosystem. That is a graveyard (CoinGecko, 2026).

That matters because Bitcoin’s relative success is constantly used to imply that the broader crypto universe has substance. It does not. If this system were more than a frenzy of speculative enthusiasm, far more of these projects would be floating. They are not. Most of them are wreckage. What the public record suggests instead is what Alan Greenspan once warned about in another bubble context: “irrational exuberance” driving asset values beyond any durable foundation. In his December 5, 1996 speech, Greenspan asked how “irrational exuberance” can unduly escalate asset values and leave them exposed to prolonged contractions. That warning fits this landscape better than the sales pitch does (Greenspan, 1996).

Bitcoin may be the survivor everyone points to, but one survivor does not redeem a field full of corpses.

A popularity craze can make one or two winners look like proof of concept while covering up a mountain of failures behind them. The internet does this all the time. A handful of survivors become famous, and the dead are forgotten. But the dead still count. In crypto, they count by the millions. That is not evidence of intrinsic value. That is evidence of a speculative environment where belief comes first, popularity drives attention, and most of the wreckage gets buried under the noise (CoinGecko, 2026; Greenspan, 1996).

The Agreed-Value Problem

Crypto supporters often respond by saying that value is always socially constructed. There is some truth to that. Markets are social systems. Prices are not written into nature. But that argument is too cute by half. The fact that value involves social agreement does not mean every agreed price is stable, rational, or justified. Dot-com stocks proved that. Housing proved that. Crypto is proving it again. Agreement can create a price. It cannot guarantee a floor.

That is the core issue here. People can collectively decide that something is worth a great deal right up until the moment they stop deciding that. If there is little underneath the price beyond a story, a scarcity narrative, and the expectation of resale, the entire structure can unwind. That is why central bankers and international financial institutions keep stressing that unbacked crypto-assets are speculative and weak as money. They are not making a philosophical argument. They are making a practical one. Systems built mainly on belief remain vulnerable when belief turns (Bains et al., 2022; Waller, 2023).

History, Memory, and the Public’s Weak Spot

The larger problem is that modern societies are terrible at historical memory. Every bubble arrives wrapped in a claim that this time is different. Every speculative boom presents itself as genius while it is rising. Critics are mocked as backward, fearful, or unable to understand the new paradigm. Then the collapse comes, and suddenly everybody rediscovers gravity.

That is why the dot-com bubble still matters. It does not prove that all new technologies are fake. It proves something more useful: real innovations and irrational valuations can coexist for a long time. A technology can be important, even transformative, while the pricing built around it remains foolish, unstable, and detached from reality. That is the real warning contemporary society should take from that episode (Encyclopaedia Britannica, n.d.).

Crypto may survive in limited forms. Some blockchain-related tools may find durable uses. That is possible. But none of that changes the central issue. Most ordinary people are not confused when they look at crypto and ask what it is really grounded in. That is the right question. And history keeps giving the same rough answer: when belief is the main support, collapse is always on the menu.

Belief alone can produce a market. It cannot guarantee permanence. And when belief is doing most of the work, zero is never as far away as the salesmen want the public to think.

The best thing I can tell you right now about crypto is this: do not treat it like a religion, and do not treat it like a retirement plan. If you bought in low and you are sitting on real gains, take a meaningful portion of those gains off the table and move them somewhere stable, boring, and safe. Put it in a certificate of deposit, a savings account, or some other low-yield shelter that is not built on hype and adrenaline. Then, if you still want to play the game, let the rest ride. That is at least a rational way to handle a speculative market. A person who refuses to lock in any gains at all is not investing. He is volunteering to be taught a lesson.

This essay is written by Cliff Potts, Editor-in-Chief of WPS News. WPS News has been active in one form or another on the internet since 1998; for more information, visit https://cliffpotts.org.

If this work helps you understand what’s happening, help me keep it going: https://www.patreon.com/cw/WPSNews

References

Bains, P., Sugandi, E. A., Tiwari, O., & Torre, I. (2022). Regulating the crypto ecosystem: The case of unbacked crypto assets. International Monetary Fund.

CoinGecko. (2026, January 12). Dead coins: How many cryptocurrencies have failed?

Encyclopaedia Britannica. (n.d.). Dot-com bubble & bust.

Encyclopaedia Britannica. (n.d.). NASDAQ.

Greenspan, A. (1996, December 5). The challenge of central banking in a democratic society. Board of Governors of the Federal Reserve System.

Waller, C. J. (2023, February 10). Remarks on digital assets. Board of Governors of the Federal Reserve System.

WordPress tags:

AI Boom Fizzle: A Contained Tremor, Not a Cataclysm, But Broad Reach Feared

An AI market crash might not be as bad as the dot-com bubble, but index funds mean most investors could feel the effects. Find out why.

#AIMarket, #StockMarket, #InvestmentTips, #DotComBubble, #IndexFunds

https://newsletter.tf/ai-market-drop-affects-investors-index-funds/

A potential AI market drop could impact more people than the dot-com crash because of how money is invested today.

#AIMarket, #StockMarket, #InvestmentTips, #DotComBubble, #IndexFunds
https://newsletter.tf/ai-market-drop-affects-investors-index-funds/

看到Dot-Com-bubble Wiki里的一段：

在这种氛围下，许多投资者愿意忽视市盈率等传统指标，而将信心建立在技术进步之上，最终导致了股市泡沫 。995 年至 2000 年间，纳斯达克综合指数上涨了 400%。其市盈率一度高达 200 倍，远超 1991 年日本资产价格泡沫时期日经 225 指数 80 倍的峰值市盈率。1999 年， 高通股价飙升 2619%，另有 12 只大型股股价涨幅均超过 1000%，还有 7 只大型股股价涨幅均超过 900%。尽管纳斯达克综合指数上涨 85.6%， 标普 500 指数上涨 19.5%

想到了一句话“天欲其亡，必先令其狂”。

https://en.wikipedia.org/wiki/Dot-com_bubble

#互联网泡沫 #dotcombubble

Something I do find interesting with the popular fediverse wish of ultimate AI bubble dotcom bubble style implosion (slight exageration to summarize):

The most common portfolios people are likely holding are unoptimized, usually single FTSE100/S&P500/MSCI World etc ETF portfolios (there might be some separate EM exposure, broad bond ETFs, some single-topic-funds etc., but in my experience people with those are already outliers).
In the case of the "glorious AI implosion" those would see more than signifcant losses for likely a very substantial amount of time, likely often unbuffered by dividend payments as these portfolios effectively have more than substantial exposure to the central actors of the AI bubble.

Given that a correction of that sector is indeed not unlikely to happen - what are the hedges and mitigations people have prepared for themselves for this risk scenario?
A faint hope for diversification and dollar-cost-averaging to fix it until retiring age?

#dotcombubble #dotcombubblecomparison #dotcombubblealloveragain #investing #etfs #aibubble #aibubbleburst #strategicpopcornreserves #hedging #mitigationstrategies #dollarcostAveraging #mag7 #faang

"Now, I know what you’re thinking. Ed, isn’t that exactly what’s happening here? We’ve got overvalued startups, we’ve got multiple unprofitable, unsustainable AI companies promising to IPO, we’ve got overvalued tech stocks, and we’ve got one of the largest infrastructural buildouts of all time. Tech companies are trading at ridiculous multiples of their earnings-per-share, but the multiples aren’t as high. That’s good, right?

No. No it isn’t. AI boosters and well-wishers are obsessed with making this comparison because saying “things worked out after the dot com bubble” allows them to rationalize doing stupid, destructive and reckless things.

Even if this was just like the dot com bubble, things would be absolutely fucking catastrophic — the NASDAQ dropped 78% from its peak in March 2000 — but due to the incredible ignorance of both the private and public power brokers of the tech industry, I expect consequences that range from calamitous to catastrophic, dependent almost entirely on how long the bubble takes to burst, and how willing the SEC is to greenlight an IPO.

The AI bubble bursting will be worse, because the investments are larger, the contagion is wider, and the underlying asset — GPUs — are entirely different in their costs, utility and basic value than dark fiber. Furthermore, the basic unit economics of AI — both in its infrastructure and the AI companies themselves — are magnitudes more horrifying than anything we saw in the dot com bubble.

In simpler terms, I’m really fucking worried, and I’m sick and tired of hearing people making this comparison."

https://www.wheresyoured.at/dot-com-bubble/

#AI #GenerativeAI #LLMs #DotComBubble #AIBubble #VC #VentureCapital #BigTech

The main difference between the #dotcombubble and the #aibubble is that websites were still useful after the bubble burst.

#grandtheftautocomplete will always be shite.