Bubbles and Gravity: 300 Years of Speculative Madness from Newton to Crypto

TL;DR: The 1720 South Sea Bubble shares striking parallels with today's crypto crashes. From Newton losing £3M (in today's money) to Mantra's 90% collapse in 2025, the pattern remains: artificial scarcity, speculative hysteria, regulatory gaps, and inevitable gravity. Despite crashes, valuable innovations survive—both Royal Exchange from 1720 and today's value-creating blockchain projects. Human psychology is the one constant across 300 years of financial bubbles.

In 1711, heated debate filled England's famous yellow-stone parliament. The country was crushed under enormous debt from the War of Spanish Succession. At this critical moment, a company called "The South Sea Company" offered to take over the state's £32 million debt—for just £7.5 million.

When the details were announced in parliament, murmurs of admiration rose from the chamber. The company promised enormous profits through trade with Spanish colonies in South America and its exclusive monopoly privileges. These foreign trade rights included permission to conduct business in certain regions, though in practice, this trade never reached the expected volume. King George I's personal governorship of the company was enough to cement a sense of trust.

Even Sir Isaac Newton, the famous scientist who discovered gravity through a falling apple, didn't hesitate to invest a significant portion of his fortune in this venture. The promised return, initially 6%, quickly rose to 100%.

The Fever of Speculation

In the spring of 1720, London's famous Exchange Alley coffeehouses buzzed with a single topic: South Sea shares. Prices soared from £128 in January to £550 in June, reaching an incredible £1000 by August. People sold their homes to buy shares, enthusiastically giving each other "guaranteed profit" advice.

New "bubble companies" emerged across the city—ventures promising to "produce fresh water from seawater," "create perpetual motion machines," and even one offering "an extremely profitable venture whose purpose will be announced soon" began selling shares.

A few skeptical voices, like pamphleteer Archibald Hutcheson, warned that there was no real economic activity underlying all this madness. But who would listen? When everyone was getting rich, caution seemed foolish.

The Beginning of the Fall

In September 1720, the first cracks appeared. The company's potential trade with Spanish colonies wasn't as profitable as expected—in fact, almost no trade materialized. The company had created an illusion of value by buying and selling its own shares.

When the first sales began, panic spread. By December, shares worth £1000 had fallen to £124—losing 88% of their value. Newton, having lost approximately £3 million in today's money, bitterly remarked: "I can calculate the movement of the stars, but not the madness of men."

Anger filled the streets. Suicides increased. Parliament launched an investigation, uncovering a vast network of corruption. The "Bubble Act" of 1720 prohibited the creation of similar companies.

300 Years Later: Crypto Fluctuations

In 2017, coffeehouses had given way to Telegram groups, and Exchange Alley to Twitter. Bitcoin had surged from $1,000 to $19,000, then experienced a sharp decline. ICOs (Initial Coin Offerings) proliferated rapidly, with some raising millions of dollars with vague promises at the level of "crypto venture with purpose to be announced soon."

A similar wave formed around NFTs and meme-coins in 2021. When the Terra/Luna ecosystem collapsed in 2022, the ripple effect extended to the FTX collapse. And finally, in early 2025, the Mantra (OM) token, claiming to be backed by real-world assets, experienced a 90% collapse due to circulating supply manipulation and token distribution control creating an illusion of value.

Is History Repeating Itself?

Across 300 years, we see surprising similarities in the anatomy of two different bubbles:

1. The Trust Deficit Faced by All Financial Innovations: The South Sea Company proposed a new economic model based on paper money. Crypto also offers a radical solution for digital value transfer.

2. Technological/Financial Complexity: In both cases, most investors did not fully understand the underlying mechanisms.

3. Need for Official Approval: Just as the South Sea Company gained credibility through King George's endorsement, crypto gained trust as it received institutional acceptance.

4. Lack of Regulation: In both cases, regulations to prevent systemic risks came after the collapse.

5. Speculative Cycle Without Value Creation: South Sea essentially wasn't conducting trade; crypto projects are also often valued without real-world applications.

And In The End...

After the South Sea bubble burst, the company continued to exist—indeed, it continued trading until 1853. Some companies established during that period, like Royal Exchange and London Assurance, still exist today.

Similarly, crypto crises won't wipe out the entire ecosystem. While Luna and FTX collapsed, projects creating real value and solving real-world problems will continue to survive.

As Thomas Moore wrote in his poem:

"Bubbles, bright as ever Hope Drew from fancy – or from soap; Bright as e'er the South Sea sent From its frothy element!

...

See!—But hark my time is out — Now, like some great water-spout, Scaterr'd by the cannon's thunder, Burst, ye bubbles, burst asunder!"

Whether you invested in South Sea in 1720 or Mantra in 2025, the same human impulses, the same hopes and fears, the same bubble cycle continues. Perhaps history's most important lesson is this: Technologies change, economic models evolve, but human psychology remains the same.

And just as Newton should have remembered his apple, we too should remember: The gravity of real value will, sooner or later, bring all financial bubbles back to earth.