The Mad Scientist and the Market: How Sir Isaac Newton and the NFT Bubble Prove That Even Genius Can't Predict "The Madness of People"

By Miguel Ríos, Stanford Alumnus & Solutions Architect  - Jan. 17, 2026

Phase 1: The Calculated Exit (Newton's Prudence)

When the South Sea Company proposed its scheme in 1720 to consolidate the British national debt in exchange for exclusive trading rights in the South Seas, the promise of vast wealth ignited intense speculation. As a shrewd financial manager, Newton understood the fundamentals. He invested early, buying shares at a low price based on credible financial reasoning (the government's backing and the debt-swap plan).

The critical moment came in April 1720. Sensing the mania was becoming detached from reality, Newton calmly sold his £7,000 stake, realizing a very handsome 100% profit. His initial action was based entirely on financial calculus and fundamental analysis: the belief that the price had outstripped the realistic value of the company’s prospects.

Phase 2: The Emotional Trap (The Fateful Re-Entry)

This is where calculation gave way to human emotion. After Newton sold, the stock continued its astronomical, irrational rise, fueled by public frenzy and stories of immense, easy wealth all around him.

Despite his towering intellect, Newton was not immune to two powerful forces that define speculative bubbles:

1. The Challenge to His Judgment: The market, in its short-term irrationality, was proving his cautious exit "wrong." For a man who believed in discernible order and rules, this defiance was a direct challenge.

2. FOMO (Fear Of Missing Out): Watching others make fortunes he felt he had a right to (having identified the opportunity early) was agonizing.

He abandoned his own earlier prudent assessment for a speculative chase, likely rationalizing: "The world has gone mad, but I cannot stand aside from this madness. The momentum is so strong, I can get in and out before the turn." At the very peak of the bubble, he plunged back in, re-investing a much larger sum.

The Catastrophic Result

The bubble burst in the autumn of 1720, and the stock price collapsed. Newton lost the equivalent of over £2 million in today's money, virtually his entire life's savings.

It was after this disaster that he uttered his famous lament:
"I can calculate the motions of the heavenly bodies, but not the madness of people."

His genius was for order, not chaos. He could reason about the system (planetary motion, debt schemes), but he could not reason about the psychology of the participants once speculation reached a fever pitch.

The 21st Century Echo: The NFT Bubble (2020-2022)

While no modern bubble is a perfect match for the South Sea Bubble, the underlying dynamics of speculative mania, narrative-driven valuation, and the disconnect between price and cash flow frequently recur. The clearest recent example is the Non-Fungible Token (NFT) mania.

The "Newton Moment" in the Digital Age

A modern parallel involves a brilliant technologist in early 2021. They understand blockchain's potential but see most NFT projects as frivolous. They sell their early "CryptoPunk" for a massive profit. But for months, prices keep soaring. Friends are getting rich off pictures of bored apes. The overwhelming FOMO drives them to re-enter, reasoning, "The trend is still strong, I'll get back in with more capital on this newer, hotter project." They buy a high-profile NFT at its peak... just before the market turns.

Their technological insight was as useless against the madness of the crowd as Newton's gravitational laws were against the frenzy of the South Sea market.

Examples of Hype Versus Reality

The NFT bubble was defined by a massive chasm between promises and delivery. Many projects failed to offer any real utility, leading to widespread value crashes and scams (rug pulls).

A study found that by 2025, over 95% of NFTs became worthless. Trading volumes, once $25 billion in 2021, dried up.

The Celebrity Effect and Regulatory Scrutiny

Celebrities played a major role in fueling the hype, often promoting projects without disclosing their financial ties—an issue that mirrored the political bribery and insider dealing of the South Sea Bubble era.

Celebrities have since faced legal ramifications, including class actions and SEC fines, underscoring that deceptive promotions are a constant feature of speculative excess.

Conclusion

Sir Isaac Newton's legacy is one of the ultimate triumphs of human reason, yet his failure in the South Sea Bubble remains a crucial lesson: analytical genius provides no shield against human behavior.

His story, mirrored so cleanly by the NFT mania, reminds investors across three centuries that the rules governing speculative markets are not the orderly, predictable laws of physics, but the chaotic, emotional, and often ruinous laws of the madness of people. In the end, sound fundamental analysis must be protected from the insidious influence of FOMO and the irresistible, yet ultimately unsustainable, pressure of the crowd.