Dotcom Bubble

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Definition of 'Dotcom Bubble'

The dot-com bubble was a period of excessive speculation in technology companies during the late 1990s. The term "dot-com" is a reference to the dot-com domain, which was popular at the time. The bubble began around 1995 and reached its peak in 2000. During this time, many technology companies were founded and their stock prices soared. However, the bubble burst in 2001 and many of these companies went bankrupt.

There are a number of factors that contributed to the dot-com bubble. One factor was the rise of the internet. The internet was a new technology that had the potential to revolutionize many industries. This led to a great deal of excitement and speculation about the potential of internet companies.

Another factor was the low interest rates. The Federal Reserve kept interest rates low in order to stimulate the economy. This made it cheap for investors to borrow money, which led to more investment in technology companies.

Finally, there was a lack of regulation in the technology sector. This allowed companies to make exaggerated claims about their products and their potential. This further fueled the speculation and led to even higher stock prices.

The dot-com bubble had a number of negative consequences. The most obvious consequence was the collapse of many technology companies. This led to job losses and economic hardship for many people. The bubble also led to a loss of confidence in the stock market. This made it more difficult for companies to raise capital and invest in new projects.

The dot-com bubble was a cautionary tale about the dangers of speculation. It showed that even the most promising new technologies can be subject to bubbles and crashes. The bubble also highlighted the need for regulation in the financial markets.

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