The pandemic-fueled asset bubble was a wild time to be an investor.
If it had a ticker, it was going higher. A lot higher. Didn’t matter if it was a stock or a bond or a commodity or a SPAC or a crypto token or an NFT. Prices became completely delinked from economic reality. Even if an investor were discounting, lol, fifty years into the future, things were completely out of control.
The only calculus you needed to make was “Can I sell this to someone at a higher number in a few hours or maybe a few days.”
The drivers of this behavior were clear at the time; what I’m about to say isn’t revisionist history. We were all home with a lot of free time, not much to spend money on, and stimulus checks coming in the door. So we gambled our asses off. Things got pretty weird.
Zoom, which came public in the spring of 2019, gained 735% between January and October of 2020, catapulting its market cap past ExxonMobil, a descendant of Rockefeller’s Standard Oil, which got its start in 1870.
SPACs raised $83 billion from investors in 2020. In 2021, Lucid came public through one of these vehicles, raising more than $4 billion from investors at a $40+ billion valuation. The electric car maker hadn’t actually put any cars on the road. But no matter. Four months later it crossed $90B.
Rivian went the traditional IPO route and came public sporting a market cap of $100 billion. Despite having barely any revenue, it was the second most valuable U.S. car company when it came out. In just a few sessions its market cap vaulted north of $150B.
Bitcoin ran from 10k to 69k in ten months. Ether went from $200 in the spring of 2020 to $4,800 by the winter of 2021. Dogecoin, a literal joke, had a market cap in the hundreds of millions of dollars in 2020. By ’21, it shot up tens of thousands of percent, stopping just shy of a hundred billion dollars.
And then there were NFTs. EtherRock, a picture of a fake rock, no seriously, at one point had a floor price of $2.26 million. Bored Apes and Crypto Punks were also fetching millions of dollars. CryptoDickButts, a more modest project, was fetching ten grand a pop.
Things got really silly.
And then it all came crashing down as consumer prices skyrocketed and the Federal Reserve slammed on the brakes of the economy.
ExxonMobil is now twenty times larger than Zoom. Dogecoin fell 92% from its high. Lucid crashed 95%. Rivian’s market cap is $10 billion, down 90% from where it came public.
In the summer of 2022, Bored Ape’s were trading at an average price of 170 ETH. The average price today is 20 ETH. Bitcoin lost three-quarters of its value.
The vibes got demolished.
And now they’re back. Boy are they back.
Bitcoin is just 3% from its high back in November 2021. It’s up 23% in the past week, 56% in the past month, and 200% in the past year. Not bad, but not quite as good as Dogecoin, which is up 100% in the past week. And that’s also not bad, but it’s not quite as good as Shiba Inu, which is up 230% over the past week.
It’s not just the coins that are rocking, NFTs are back. Pudgy Penguins, which you could have picked up for ~2 grand in October, are trading for ~$55k right now. Eight have sold in the last hour. A CryptoPunk just sold for 4,500 ETH, or $16 million.
It’s not just the coins or the NFTs that are on fire, stocks are getting dumb too.
Two weeks ago, Nvidia added $276 billion in a single day after reporting earnings. That’s the most market cap gained in a single day ever. Today, the company is worth $74 billion more than it was on Friday on news that it’s Monday. The third largest company in the S&P 500 is up 72% in the first 43 trading days of 2024.
Riding the same wave is Super Micro Computer, which is up 20% today on news that it’s being added to the S&P 500. It’s gained 284% year-to-date (it’s March). It has a market cap of $61 billion on $3.6 billion of revenue in the most recent quarter. For context, FedEx is the same size and did $38 billion in its most recent quarter. This is a dumb comparison, but not nearly as dumb as the market is treating this stock.
I don’t know if the party is just getting started or if it’s going to end at 7 o’clock tonight. But what I do know is that this type of market can wreak havoc on your mental balance sheet.
It’s hard to watch and not feel like you’re missing out. FOMO is not evenly distributed. The more online you are, the likelier you are to feel it. The less secure your finances, the likelier you are to feel it. The more your friends are making money, the likelier you are to feel it.
Some people don’t have this gene. I wish I was one of them. Thankfully I’ve learned to control it. I’ve put personal guard rails in place. I implore you to do the same.
If you’re feeling anxious about missing out, picture what you’re going to feel like if this lasts another week, month, or longer. And if it does go on longer than you think it will, constantly remind yourself what happened the last time we were here, and what ultimately happened.
I have no problem with speculative behavior, but like walking into a casino, you have to know your limits, set them, and then don’t go back to the ATM once you hit that number. Have fun, but be careful out there.
