What Caused the 2000 Stock Market Crash?
What caused the dot com bubble of the year 2000? The decade of 1990, saw a consistent decrease in interest rates from 8% in 1990 to around 5% in 1999, this made borrowing money very cheap. And not only that but the penetration of internet and access to computer technology in the United States was increasing, which created a massive interest not only of the consumers but also of the venture capital funds. Cheap money combined with a promise of novel and futuristic technology, fueled the massive funding of internet technology startups by the venture capital. A lot of startups that were not profitable or even had revenue or a completely finished product, got huge funding from venture capital and got listed on the stock market. This made a lot of the internet technology companies extremely overvalued and created a stock market bubble. However from 1999 to 2000 the central banks raised interest rates from 5% to 6.5%, this made the investments in overvalued technology stocks not feasible and investors pulled their money out of the stock market, causing a massive collapse. The crash lasted for 2 years and it is estimated that only 48% of the internet technology companies survived after the dot com bubble burst.
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