• New_account@lemmy.world
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    1 year ago

    The past 15 years of growth in anything technology adjacent has been fueled by one thing: Extremely cheap debt. Interest rates have at been rock bottom since the 2008 crisis, and they’ve only started to tick up recently. That means the ability to fund infinite growth for basically nothing, so tech companies have relied heavily on debt financing.

    Now though, that’s no longer viable. Silicon Valley Bank was very heavily involved with all these tech companies, and it went insolvent in March largely because of rising interest rates. They held a lot of long term bonds at low interest rates. In normal conditions, rising interest rates mean lower bond prices and unrealized losses, but not a major problem because they can just hold them to maturity and never realize the loss. Bank runs forced SVB to sell the bonds for huge losses though, turning unrealized losses into realized losses, and a non-issue into a major problem.

    Now that cheap debt is gone, these tech companies are desperately scrambling to attain profitability. It hasn’t been discussed much, but this is a big reason for the changes at both Twitter and Reddit.

    • notavote@lemmy.world
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      1 year ago

      Additionally, even YouTube is trying to enforce ads more strongly and gyfcat is closing down.

      People are looking for conspiracies, I like them too, but this was just a bubble waiting to burst.

      It will be interesting to see what will come after.