Yves here. Yours truly is a very poor judge of how far a mania can go. I recall in December 1996 when Alan Greenspan wondered if dot com prices were a sign of irrational exuberance. When the Dow fell by 143 points due to his remark, Greenspan made a point of never getting in the way of that bubble again. Even so, it was remarkable to see delusion become normalized, such as valuing companies that would clearly never earn a dime based on eyeballs, or it becoming routine for mere MBA students to be able to raise $5 million with a 5 page plan for an Internet venture. Today, it has taken Ed Zitron and other financial sleuths to try to unpack the extremely unprofitable economics of AI companies, ex the chipmakers, due both to games like circular financing and obscuritanist methods of reporting.
We skipped over the latest Strategy tsuris although we covered it in detail back when doubts first arose:
🚨 STRATEGY IS NOW IN VERY DANGEROUS POSITION
The company spent $1.38 billion, nearly 61% of its total cash reserves, to buy back debt at a discount.
Strategy now has just $870 million in cash left while holding $64.8 billion worth of Bitcoin.
One sharp BTC crash could change… pic.twitter.com/v90DJRfr4b
— Crypto Rover (@cryptorover) May 26, 2026
Another cheery assessment:
Bitcoin dumped to $68K for a reason.
History is repeating itself.
Bull trap at $97K, then $83K. Exactly as expected.
Now $BTC dumps like this:
$65K → $61K → $58K → $55K → $48K.
Next stops:
→ $60K in days.→ $48K by September.
I called the $126K top in October 2025… https://t.co/CPDrE1pApp pic.twitter.com/PN30tS9aTH
— Nonzee (@0xNonceSense) June 2, 2026
By Wolf Richter, editor of Wolf Street. Originally published at Wolf Street
Bitcoin, currently trading at around $63,000, has plunged by over 50% from its all-time high last October and is down 37% year-over-year. In terms of market cap, expressed in despised inflation-wracked US fiat, about $1.2 trillion of bitcoin value has gone up into thin air.
Ethereum, the second-largest crypto by market cap, has plunged by 64% from its all-time high last August, is down 26% year-over-year, and $364 billion in market cap has vanished since the peak.
XRP, another top crypto by market cap, has plunged by 68% from its high in July last year. About $138 billion vanished.
The crypto market cap index by CoinMarketCap, which tracks all major cryptos, has plunged by $2.08 trillion since October. Over $2 trillion in value, expressed in despised worthless fiat, gone up in smoke. And yet, outside of the crypto world, there haven’t been any significant ripples.
On the other side of the equation are the massive gains these cryptos produced until their highs last year. Betting early on these cryptos was among the winningest bets of all time. Bitcoin went from zero to a market value of $2.5 trillion over the span of about 16 years, without ever having to produce any kind of product or service, revenues or profits, or even financial statements, or walk befuddled analysts through an earnings call or whatever.
Other cryptos, by now many thousands of them, came along to duplicate that feat. Cryptos were the best-ever get-rich-quick scheme of all times. But anyone can create their own cryptos, and there are many thousands of other cryptos now, many of them have been left behind for dead.
But who needs cryptos to get rich quick if the stock market’s tech sector is now providing that service for free and with less hassles?
And there are the mega-IPOs coming up, including by SpaceX, which is literally going to the moon, not just figuratively, and its valuation at the IPO price has already gone to the moon, at $1.77 trillion. At this price, it is valued at 93 times its trailing 12-month revenues of $18.7 billion, and now it’s time to sell some cryptos to shake loose some cash to buy SpaceX to hitch the next mania to the moon? With SpaceX, folks will at least get a slice of an actual company with amazing products and innovations, and not just digital units on a blockchain.
Or sell some cryptos and buy the semiconductors that have produced WTF charts on a daily basis? The other day, we talked about Micron whose market cap had spiked to $1 trillion, from $500 billion, in 48 trading days. The share price had exploded by over 850% in 12 months and by over 1,300% in 14 months. The shares rose further over the past few days, but today are down a little.
If you look closely, you can see the Dotcom Bust, during which the shares collapsed by 98%, and then remained below the 2000 high for 24 years (data via YCharts).
For a good look at the mania in the broader semiconductor space: The Direxion Daily Semiconductor Bull 3X Shares [SOXL] has spiked by 550% over the past two months, since the end of March. Over the past 12 months through yesterday, it spiked by over 1,400%, meaning it multiplied by 14. Today, it gave up some of those gains.
In turn, it’s not unusual for this triple-leveraged semiconductor ETF to collapse by over 90%, which it most recently did in 2022. In terms of the math, SOXL would have to drop by 93% this time to wipe out the 1,500% gain of the past 12 months.
Is this still a good time to chase this mania? This chart shows the percentage gains of SOXL and MU over the past 12 months (data via YCharts).
Why bet on cryptos if you can have so much fun, and so conveniently, and instantly, with semiconductor stocks that became a mania and went parabolic, and triple the fun with triple-leveraged ETFs?
But the dollar amounts are bigger with the semiconductor industry and the AI-related stocks. Therefore, the dollar amounts of the gains in portfolios are bigger, and they show up in mundane ETFs that are widely held, such as S&P 500 index funds, dominated by a dozen stocks that combined have a value of $30 trillion. And when they turn south eventually, they’ll make a much bigger dent in dollar terms.
Crypto’s 50% drop took out $2 trillion, and it didn’t produce any ripples outside of the crypto space. A 20% decline of the top 12 stocks by market cap, not including SpaceX yet, would take out $6 trillion. The total market value of the stocks in the S&P 500 is currently close to $70 trillion. A 20% drop would take out close to $14 trillion.
But as with cryptos, these stock holdings are spread around the world, not just in the US, and a portion is held by institutional investors, not just retail investors.
So any damage gets spread around the world, not just in the US, and it gets spread around investor classes, not just retail investors.
And in the past, drops of around 20% didn’t produce significant economic ripples in the US. But the much bigger drops during the Dotcom Bust did eventually produce economic ripples, though most of the economic damage occurred in the cities where these companies were located, while the ripples further afield were minor.
