From 1720 to 2025: The Recurrence of Speculative Bubbles and the Future of Crypto
From 1720 to 2025: The Recurrence of Speculative Bubbles in History | The South Sea Bubble and Crypto: 4 Crucial Lessons from History
History Repeats Itself: The Crypto Market Crash and Lessons from the Past
The latest crypto crash has shaken investors, surpassing even the FTX and LUNA crises, leading to $2.2 billion in liquidations. Panic is spreading as Bitcoin and altcoins suffer sharp declines, leaving the market in a state of uncertainty.
As investors share memes like "I only have my soul left from my capital," it reminds us of one of the greatest speculative bubbles in history: the South Sea Bubble. Throughout history, investors have pursued quick riches, often leading to devastating losses. Even Sir Isaac Newton fell into this trap!
This latest crypto collapse, already dubbed the "Customs Duty Crash," is one of the three largest in crypto history. However, a much bigger event happened centuries ago: the South Sea Bubble !
The South Sea Company and the Great Speculative Bubble
The Company's Foundation and Grand Promises
Founded in 1711, the South Sea Company was established to manage England’s national debt and promised enormous returns to investors. In 1713, the Treaty of Utrecht granted the company exclusive rights to trade enslaved people to Spanish colonies in South America. However, this so-called lucrative trade never materialized!
Despite having little to no real revenue, the speculative frenzy surrounding the company continued—just like some crypto projects today.
1720: Stock Prices Soared, Then the Crash Began
In 1720, the company assumed England’s national debt, making it a financial powerhouse. Stock prices skyrocketed from £100 to £1000, fueled by investor hype. The public rushed to invest, lured by the promise of astronomical gains. However, the price surge had no real economic foundation.
By August 1720, the bubble burst! Panic selling ensued, and shares plummeted from £1000 back to £100, bankrupting countless investors.
Newton’s Stock Market Disaster
Sir Isaac Newton, one of the greatest minds of his time, failed to account for the power of investor psychology and emotions in financial markets.
Initially, he made a profit by investing early but then sold his shares. However, driven by greed, he reinvested at the peak—just before the crash. When the bubble burst, he lost nearly £20,000, a massive fortune in that era.
Following this devastating loss, Newton famously remarked:
"I can calculate the motion of heavenly bodies, but not the madness of people."
Today, crypto investors make similar mistakes—buying at peaks, ignoring risks, and assuming the market will continue rising indefinitely. This often leads to massive financial losses.
Lessons for Crypto Investors from the South Sea Bubble
The South Sea Bubble is a timeless example of how investor psychology influences speculative markets. Here are four key takeaways for crypto investors:
1. Don’t Blindly Follow Speculative Surges
Just because an asset’s price is skyrocketing doesn’t mean it will rise forever. Every speculative boom is followed by a correction.
2. Risk Management Is Essential
Crypto investors must be cautious with leverage and excessive risk-taking. Using stop-loss orders and risk management strategies is crucial to avoid catastrophic losses.
3. Don’t Let FOMO (Fear of Missing Out) Control You
Even Newton fell victim to FOMO, reinvesting at the peak and losing a fortune. Don’t blindly trust social media hype and unrealistic "to the moon" claims—unplanned investments often end in disaster.
4. Big Players Control the Market
In 1720, even the King of England and government officials were involved in the speculative bubble. Today, large investors ("whales") manipulate the crypto market. Avoid making impulsive trades based on hype or panic.
Conclusion: History Always Repeats Itself
The crypto market crashes we witness today are modern reflections of historical financial crises like the South Sea Bubble. As long as human psychology remains the same, speculative bubbles and crashes will persist in financial markets.
Even Newton, a genius in physics and mathematics, couldn’t outsmart the stock market’s irrationality. The key to survival is to make well-researched investments based on real value, technical analysis, and sound risk management strategies.
Remember: The stock and crypto markets have humbled even the greatest minds! 🚀
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