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Bitcoin, Bubbles, and the Madness of Crowds
There’s a dangerous idea quietly circulating in modern culture: don’t think you’re special; don’t think you know better than the crowd. It sounds humble, even virtuous. But history tells us something very different.
When independent thinking is dismissed, when skepticism is framed as ignorance, societies don’t become wiser—they become fragile. And nowhere is this more visible than in financial bubbles.
Today, I want to talk about Bitcoin, crypto, and speculative manias—not with hype, and not with hatred, but with history.
When the Greatest Investors Call It “Rat Poison”
“Bitcoin is rat poison squared.”
Those are not my words. They belong to Charlie Munger, echoed repeatedly by Warren Buffett—two of the most successful investors in human history. Together, their investment track record runs into millions of percent over decades.
When people like that speak, it’s worth listening.
To be clear: Bitcoin’s price performance has been extraordinary. Anyone who bought early and held deserves recognition for the returns they achieved. I’ve felt that pull myself.
In 2016, I was close to buying roughly $150,000 worth of Bitcoin. At today’s prices, that stake would have been worth somewhere between $20–25 million. I didn’t do it—not because I lacked conviction, but because transferring money into crypto at the time was operationally difficult.
A friend of mine did take the plunge. He bought Ethereum at around 50 cents and sold near $1,400—a roughly 2,800× return. Stories like his aren’t rare. We’ve all heard about people who jumped into something absurd-sounding and walked away rich.
And that’s exactly the problem.
FOMO: An Ancient Survival Instinct in Modern Markets
FOMO—fear of missing out—is not a personality flaw. It’s evolutionary.
For most of human history, survival depended on belonging to the group. Being excluded meant danger: no food, no protection, no mating opportunities. That wiring never left us.
So when everyone around us seems to be getting rich, when dissent is mocked and skepticism labeled ignorance, our instincts scream: get in or be left behind.
Even the greatest minds are not immune.
In the 1700s, Isaac Newton invested in the South Sea Company. He made money, exited wisely—then watched others grow richer. He re-entered at the peak. The bubble collapsed, and Newton lost a fortune.
Afterward, he famously remarked:
“I can calculate the movement of heavenly bodies, but not the madness of men.”
How Crowds Rewrite Reality
Psychology reinforces this lesson.
In the famous Smoke-Filled Room experiment (1968), participants sat in a room completing paperwork when smoke began pouring in. When alone, most people immediately reported the danger. But when surrounded by others who calmly ignored it, nearly 90% did nothing.
The presence of a crowd didn’t make people safer—it made them blind.
Financial bubbles work the same way.
A Short History of Financial Madness
Every major bubble follows a familiar script:
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A real innovation appears
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Speculation overtakes utility
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Prices rise because prices are rising
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Dissent is ridiculed
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Collapse follows
Tulip bulbs in the 1630s traded for the price of houses.
Railways in the 1840s promised a new world—and delivered bankruptcies.
The Roaring Twenties had cars, electricity, and radios—followed by the Great Depression.
The dot-com era had the internet—Wall Street, media hype, and “new economy” logic—then an 85% Nasdaq crash.
The technology was always real.
The pricing never was.
The Emperor’s New Clothes, Revisited
In Denmark, we grow up with Hans Christian Andersen’s The Emperor’s New Clothes. Two fraudsters convince an emperor they’ve made magical garments invisible only to the unworthy. No one admits they see nothing—until a child speaks the obvious truth.
Financial bubbles depend on the same social pressure.
Nobody wants to be the “stupid one” who doesn’t get it.
Bitcoin and the Largest Bubble Yet
Let’s look at scale.
Buffett and Munger often reference market capitalization to GDP as a broad measure of financial excess:
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1929: ~89%
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2000 (dot-com peak): ~136%
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2007 (pre-financial crisis): ~107%
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Today: ~226%
This is not normal.
Bitcoin alone is up over 1.2 million percent since 2012. The Nasdaq and crypto markets now move in near-lockstep. In the dot-com crash, the Nasdaq fell 85%—and that bubble was far smaller than today’s AI-and-crypto-fueled exuberance.
Bitcoin historically falls more than the Nasdaq in downturns.
If we enter a recession—and rising unemployment has always preceded recessions—what happens when the broader market cracks?
A 95% drawdown in Bitcoin is not unthinkable. It is historically consistent.
Technology ≠ Guaranteed Returns
None of this denies the reality of blockchain technology—just as railways, electricity, and the internet were real. But innovation does not protect investors from overpaying.
Markets don’t crash because technology fails.
They crash because expectations detach from reality.
The Hardest Truth
Bitcoin may survive. Crypto may survive. Some companies will emerge stronger.
But bubbles do not deflate gently. They burst.
And when they do, the crowd that once mocked skepticism will insist no one could have seen it coming.
History says otherwise.
Sometimes, it takes the courage to be the child in the crowd—the one willing to say: the emperor isn’t wearing any clothes.
Warren Buffett and Charlie Munger did.
So did Isaac Newton—after it was too late.
The rest of us still have time to listen.
