Eighteen years after the dot-com bubble, the same trick worked with a new word. In 2017 a small company could say "blockchain" and watch its stock multiply, and a startup with a white paper could raise millions from strangers without selling a single share. Here is how the boom worked, who got paid to talk it up, and where it ended.
The noun did the work, again
On 21 December 2017 Long Island Iced Tea Corp., a drinks maker with about $5 million in yearly sales and a market value under $24 million, renamed itself Long Blockchain Corp. and said it was shifting its focus to "opportunities that leverage the benefits of blockchain technology". It would keep making iced tea. The stock jumped more than 200% at the open and closed up 183% that day [1].
It was not alone. A study of company filings that mentioned blockchain or bitcoin through mid-2018 found that most came from firms with no prior business in the field, that their stocks jumped on the news, and that the jump was mostly gone within 30 days [2].
Tokens instead of shares
The bigger money skipped the stock market entirely. In an initial coin offering a project sold its own digital tokens directly to the public, usually on the strength of a white paper and a countdown clock. In the last three months of 2017 alone, token sales raised about $3.2 billion, roughly sixteen times what venture investors put into blockchain startups in the same quarter [3].
Most sellers said their tokens were not securities, so the rules for selling stock did not apply. In July 2017 the SEC said that, at least for one well-known token sale, they were wrong: tokens "offered and sold" by a so-called decentralised organisation "were securities" [4]. In September, Chinese regulators banned token sales outright and ordered past ones refunded [5]. The sales went on anyway.
Paid voices
Token sales were marketed like concerts, with celebrities posting about them. In November 2017 the SEC warned that a celebrity endorsement "may appear unbiased, but instead be part of a paid promotion", and that promoting a security without disclosing "the nature, source, and amount of any compensation paid" could be unlawful [6].
A year later it brought its first cases: two celebrities had been paid a combined $350,000 to promote token sales without saying so. They paid back the fees, plus penalties and interest, without admitting or denying the findings [7].
The regulator pulled the plug
When a stock moved too far on too little, the SEC could simply stop it trading. The Crypto Company, a small California firm, rose more than 2,700% in December [8], to a market value of more than $11 billion [9]. On 18 December 2017 the SEC suspended trading in it until 3 January, citing "the accuracy and adequacy of information in the marketplace" and "potentially manipulative transactions" in its stock [10]. For a company whose value was its story, two weeks of silence was a long time.
How it ended
Bitcoin, the coin the whole boom took its cue from, peaked at about $19,870 on 17 December 2017. A year later it was about $3,391, down 83% [11].
The iced-tea company dropped its plan to buy bitcoin-mining equipment, was told in April 2018 that Nasdaq would delist it, and was subpoenaed by the SEC that July. In 2021 the SEC revoked its registration for failing to file financial reports, and charged three people with trading on a draft of the rename announcement before it went out [12].
The game on top
Synthetic Demand is a satire of exactly this. You are the CEO of an invented company and you have one job: make the stock go up before you sell. A market like 2017 is one of the ones you can be dealt, though nobody tells you the year until it is over. You can pivot to whatever the market is buying, hire a promoter, or say the right noun, and the tape answers. So, sometimes, does the regulator.
Every call you make, and every one you don't, is graded A to F. The good grades go to CEOs who read the room. In 2017 the room was mostly a group chat.