Tulip fever is considered by many to be the first financial bubble event in human history, which is said to have occurred in the 17th century. Before discussing whether Tulip Mania was an actual financial bubble, let's look at some of the narratives that suggest it was.

Tulip Bubble

Tulip fever occurred during the golden period period in the Netherlands. At that time, the Netherlands' per capita income was the highest in the world, which was also due to its rapid development of international trade and extensive transaction business.

Economic prosperity has helped people gain more wealth and glory, which in turn has promoted the development of the luxury jewelry market. As for luxury accessories, the most coveted ones are of course tulips, especially those mutated tulips that are even more charming. Those mutated tulips had unusual colors and patterns that everyone wanted to own and show off.

Different varieties have completely different prices. The value of some flowers may be equivalent to the wages of some workers, and some may be worth as much as a house. In addition, the futures market also drives up prices because there is no physical change of hands in the futures market.

After that, a large number of farmers used their land to grow tulips, which also led to a rapid increase in supply, and the bubble finally burst within a week in 1637. Some also believe that the Black Death had an impact, as it directly resulted in many buyers failing to show up at tulip auctions. Since no financial records exist at the time, historians are not sure whether the Tulip Mania actually caused some people to go bankrupt, but what is certain is that the crash must have caused huge losses to investors. .

Tulip Fever vs Bitcoin

Tulip Fever is a lot Considered to be a prime example of a bubble bursting. This popular narrative describes a period of hype that drove tulip prices beyond reasonable levels. In this incident, although some rational people exited the market early, most people still carried out panic selling after the price plummeted, which also led to heavy losses for many investors and service providers.

Nowadays, some believe that Bitcoin and other cryptocurrencies will follow a similar pattern. But what they fail to notice is that today’s financial world has changed significantly compared to the 17th century, and there are far more market participants than there were in the 17th century. Therefore, it is a bit general to equate Bitcoin with tulip mania. In addition, there are many differences between the crypto market and the traditional market.

Key differences

Tulip is completely different from Bitcoin in terms of store of value. The flowering period of tulips is limited, and it is almost impossible to identify the type and appearance of tulips just by looking at the bulbs. Therefore, merchants had to plant bulbs and hope that the resulting tulips would have the variety or appearance they desired. Additionally, if merchants wanted to move the tulips, they would need a safe means of transporting them to their destination, with all the associated costs. At the same time, the tulip itself is not suitable for payment, because it is impossible to divide it into several small parts. Another point is that flowers are easily stolen from fields and market stalls, making tulips even more difficult to protect.

In comparison, Bitcoin is completely different because Bitcoin is digital and will be transmitted in the global P2P network. It is a digital currency protected by encryption technology, which makes Bitcoin highly resistant to fraud. Bitcoin cannot be copied or destroyed, but can be easily divided into multiple smaller units. In addition, the supply of Bitcoin is also limited, with a maximum of 21 million coins. It is true that there are some potential risks in the digital world of cryptocurrency, but as long as you follow general security principles, you can keep your assets safe.

Is tulip fever really a bubble?

In 2006, economist Earl A. Thompson published an article called "The Truth and Illusion Behind Tulip Mania", in which he discussed how tulip mania actually was It has more to do with the government’s implicit conversion of tulip futures contracts into options contracts than an actual market frenzy. Thompson argued that tulip mania cannot be considered a bubble because a bubble requires a mutually agreed-upon price above fundamental value, which is not the case.

In 2007, Anne Goldgar published a book called "Tulip Fever: Money, Honor and Knowledge in the Dutch Golden Age", in which she presented a lot of evidence to prove that at that time The popular tulip fever story is actually full of myth. In the book, Goldgar draws on an extensive research archive and concludes by arguing that the emergence and bursting of the tulip bubble was not as severe as most people thought. She emphasized that the impact on the economy is very small, and the number of people participating in the tulip market is also very small.

Summary

Whether Tulip Mania is really a financial A bubble, but comparing Bitcoin and other cryptocurrencies to tulips is certainly unreasonable. Tulip mania occurred about 400 years ago, and today’s Bitcoin is in a completely different historical context than tulips, and flowers cannot be compared to digital currencies protected by encryption technology.