2000 | Bursting of the DotCom bubble

The dotcom bubble (or internet bubble) refers to the speculative bubble of the new internet technology market in the early 2000s. Dotcom stands for the domain extension “.com” on the Internet.


At the centre of the dotcom bubble was the so-called new market, also known as the New Economy. With the emergence of the New Economy from 1995 onwards, more and more young internet companies emerged.

In the mid-1990s, the internet was still a new territory where there was a great sense of optimism. The World Wide Web slowly grew from a nerd and science tool to a mass phenomenon, mainly through the first browsers. Companies like Google, eBay, Yahoo and Amazon emerged. The internet made things possible that were still called futuristic a few years earlier: digitally networked warehousing, electronic letters without stamps, “e-mail” for short, and digital retail shops, so-called “online shops”.

Fast growth was the primary goal for the majority of internet companies. It was not uncommon for freshly founded companies to go public to raise growth capital. With the American stock index for technology companies Nasdaq at 5,048.62 points, the exaggeration reached its peak on 10 March 2000. This period was marked by numerous start-ups in the Internet sector.

Characterised by high turnover and profit expectations in the future, the prices of these technology stocks rose to heights never before reached. Private investors also soon recognised the incredible potential of the internet and its commercial use. Many private investors in the mid and late 1990s bought securities of companies whose business model they neither understood nor questioned. All that mattered was to participate in the dotcom hype, buy internet stocks and wait for higher prices.

At the same time, the key interest rates of the US Federal Reserve, averaging around 5 percent, were lower than in the 1980s, when they had at times reached over 20 percent. Cheap money was thus in plentiful supply. In addition, there were other reasons why new investors rushed to the stock exchanges: for example, the USA lowered the capital gains tax in 1997. And in Germany, the IPO of Deutsche Telekom in 1996 made shares popular as an investment. At the time, the shares were touted in a major advertising campaign as the first “people’s share”.

In the frenzy of the hype, many private investors even went into debt to buy new shares. Together with the dotcom hype, there was suddenly a social “trend” to own shares. Securities were “in” – even with complete ignorance of the most basic mechanisms of the capital market.

It quickly became apparent that the high expectations could not be fulfilled. Therefore, in 2000, there were sharp price drops on the stock market. In particular, small investors and inexperienced stock market beginners who had been infected by the euphoria had to record large losses.

Development of the Nasdaq from January 1995 to December 2002

Progression of the crisis


Vorlauf - Internethype.

7. März 2000

Der DAX steigt im Tagesverlauf auf 8.136,16 Punkte.


Der Nasdaq-Index verliert fast 77,9% seines Wertes.

5. Juni 2003

Der “Nemax 50” wird aufgrund des anhaltenden Kursverfalls geschlossen.

The beginning of the end

After lowering its interest rates in the mid-1990s, the US Federal Reserve raised them six times in a row in the early 2000s. This was seen as a major reason why the economy lost strength.

Further development

In response to the Wall Street crash, the major stock exchanges in Europe and Asia also collapsed. After the crash, the New York Stock Exchange (NYSE) introduced new regulations. The computer system was given a safety brake to prevent massive selling.

The Dow Jones is also monitored more closely. If it drops by more than 350 points, trading on Wall Street is interrupted for 30 minutes – at 550 points even for a whole hour.


Before the crisis, the companies of the Neuer Markt are still valued at 300 billion euros. In 2003, four billion of that is left. The DAX falls to about 2,000 points and has thus lost 75 percent of its value.

Comparison previous year / crisis year

7 Medium-term fractal indicators - 1999

7 Medium-term fractal indicators - 2000

Chart legend for the seven medium-term fractal indicators

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