Comparing Bitcoin (BTC) to the Dutch tulip bubble leads to misunderstanding. Technology is advancing faster than nature, and decentralized networks provide more economic benefits than a bundle. Bitcoin is a technology, tulips are plants, and no one special would go so far as to compare.
The Tulipmania bubble, a 17th century market bubble in which the price of the flower plant rose due to speculation by Dutch investors, led to a major crash. Prices were six times the average annual income at the time. The rarest lamps have become among the most expensive on the planet.
Despite the fact that the Bitcoin network has been in operation since 2009, the comparison to the tulip bubble continues to be nauseating. In February of last year, British economist and ECB adviser Gabriel Mahloff reminded us closely of bitcoin: “Three hundred years ago, people invested in tulips because they thought it was an investment.”
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Bitcoin opponents have repeatedly used tulip mania to fulfill their short-term predictions. Stories of tulip mania became popular with Scottish journalist Charles McKay in his book Memories of Unusually Common Misconceptions and Mass Madness of 1841. As Mackay wrote: “The golden bait hung temptingly in front of the people, and one by one they hurried to display it. Tulips flying around a jug of honey,” he continued, “gentlemen, and townspeople, and peasants, and mechanics, and navigators, and pedestrians, and maidservants, and even chimney-cleansers, and old tulips.” When the tulip bubble burst in 1637, Mackay claimed that the Dutch economy had been hit hard.
Although the absurdity of the situation makes for a good story, researchers point out that McKay’s retelling of tulip mania isn’t even true. In particular, historians do not support this version of events. Anne Goldgar, Professor of Early Modern History at King’s College London and author of The Tulip Madness: Money, Honor, and Knowledge in the Netherlands’ Golden Age, explains why Mackay’s version hasn’t worked.
“It’s a great story, and the reason it’s so fascinating is because people look stupid,” says Goldgar, lamenting that even a serious economist like John Kenneth Galbraith repeated Mackay’s story in the Brief History of Financial Ecstasy. :
“But the idea that tulip mania caused the Great Depression is completely wrong. As far as I understand, it had no real impact on the economy.”
In addition to the Dutch tulip mania, blockchain-powered beef markets are sometimes written off as the dot-com bubble. This is a better comparison, albeit inaccurate. The Internet of cash in all its forms, including cryptocurrency, DeFi or intangible token, has not entered the bubble stage and has not shown all the uses for it. We’re in the mid-90s, which is the equivalent of the dotcom era, and we’re nowhere near the bubble stage.
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In addition, the impact of the dotcom bubble on humanity has been much less than that of the Internet, and the blockchain is likely to follow this pattern, especially compared to tulips. Previous cryptocurrency bull markets had far more serious consequences than price increases. In 2013, the world realized that Bitcoin exists. In 2017 and 2018, they admitted the existence of a cryptocurrency. With so many projects of 2017 turning out to be imperceptible – many seem to have been undertaken solely to raise money – this period is little more than a preview of what’s to come.
Can’t compare to lily mania
The latest beef market 2020-2021, the first since the first coin offering (ICO) craze, was not the big beef market many have been waiting for. Instead, like 2017-2018, it was another showcase of what the future might be, and it draws more attention to the blockchain.
During the upcoming beef market, which is likely to come in a couple of years, leading institutions will launch DeFi and cryptocurrencies. This process has already begun. Meanwhile, FAANG employees (Facebook, Amazon, Apple, Netflix and Google) are seeing the writing on the wall and shutting down in droves to create the crypto landscape with intuitive products. Any financial professional should study DeFi and think, “I’m going to lose my job if I’m not careful.” Winklevoss once stated that each FAANG will have its own crypto project, a process called hyperbitcoinization.
This DeFi relief indicates that blockchain is the future of fintech, not just a bubble. We are still very early.