Why Bitcoin Isn’t Like Tulip Mania

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After Bitcoin ( BTC ) hit a new all-time high of nearly $70,000 at the end of 2021, we are currently clearly in a bear market , characterized by steep declines over an extended period. In addition to low confidence in the market during such a period, reports surface regularly comparing Bitcoin and the tulip mania of the 17th century.

“Broadband internet and social media have created a variant of tulip mania in 2021 that is more contagious than before, both in the speed of its spread and in the number of victims imaginable ,” as some critics have described the crypto bull market of 2021. Or: ‘ In addition, many experts see Bitcoin as a bubble. In 1634 people bought tulip bulbs en masse with the idea that these bulbs could later be sold for much more money. (…) And in both cases, the value dropped to almost 0. It is likely that this phenomenon will repeat for Bitcoin, as Bitcoin shows the same value charts ‘, as stated in an opinion piece in theFinancial Daily. Why is that plausible? And w hich ‘experts’ and value charts are meant?

Apart from roughly 500 years between the tulip mania and Bitcoin and tulips have completely different properties than cryptocurrencies, there are indeed a number of similarities between the two phenomena, so that the comparison may at first sight not be strange. Think of the high value, the rapid price increase and the hype surrounding Bitcoin. Yet many claims made about this are factually incorrect and, moreover, it is questioned by science whether the ‘tulip mania’ actually took place. In addition, there are many more differences between Bitcoin and the tulip mania than there are similarities.

This blog explains why Bitcoin does not compare well to tulip mania and discusses the 10 main differences, making it clear that Bitcoin is a better investment than tulip bulbs in the 17th century.

What is Tulip Mania?

We have all heard of the tulip mania, a term that comes from the Golden Age in which tulip bulbs in the Netherlands were sold for extremely high prices in a short period of time. This phenomenon is also known as the tulip hype, tulip madness, tulip bubble, bulb madness or bulb frenzy.

Hype in the Golden Age

The tulip, which originally came from the Ottoman Empire, was introduced to the Netherlands at the end of the 16th century and quickly led to a real hype. At the beginning of the 17th century, tulips were very scarce and the prices of tulip bulbs started to rise enormously . Single-colored tulips were the cheapest, and tulips with multiple colors and special patterns were very expensive. Rare varieties arose as a result of the ‘mosaic virus’, a plant disease that gives tulips a different color and shape. Those varieties were even more expensive, such as the most famous tulip bulb: the Semper Augustus.

The real tulip hype only started in 1736, when hundreds of guilders were paid for a tulip bulb, which even rose to thousands of guilders. This while the average annual income was around 150 guilders and some tulip bulbs were worth as much as an Amsterdam canal house. Speculation in options to buy tulips , even if they were still in the ground, played an important role in this . A buy option is an agreement that the seller commits to sell the tulips to the buyer, but reserves the buyer the choice whether or not to use the option to buy. As a result, prices could easily rise quickly. Buyers could easily agree on high prices, without being obliged to actually honor those agreements. This came to an abrupt end in 1637 when prices collapsed. Buyers were unable to pay the high prices, and sellers were unable to meet their delivery obligations.

Tulips have remained popular ever since, but the price is now a fraction of what it used to be, and never rose to its all-time highs in the 17th century.

The Features of Bitcoin

In 2008, the Bitcoin whitepaper under the pseudonym Satoshi Nakamoto was published, which described what Bitcoin is and how it can be used with meme coin.

Bitcoin is described herein as a peer-to-peer electronic money network, where transactions can be sent from one party to another without the involvement of an intermediary, such as a bank . Bitcoin is therefore intended as an alternative to the current financial system , where payments are dependent on financial institutions. Bitcoin is therefore independent of a central authority: it is decentralized. There are also fewer costs associated with this, because there are no intermediaries involved. In addition, transactions are stored in one public ledger and are irreversible: Bitcoin is therefore transparent and trustless. These benefits eventually caught the attention of the public and led to a financial revolution, which is currently still underway. After the arrival of Bitcoin, blockchain applications have expanded further, with new projects and new generations of blockchain.

Bitcoin has been around for 14 years now and has reached several all-time highs over the years: $1,200+ in 2013, $19,000+ in 2017 and $68,000+ in 2021 , demonstrating that Bitcoin’s price has been moving in a quadrennial cycle , which consists of a massive rebound followed by a massive decline and is led by Bitcoin’s halving, as shown in the image below:

Differences Between Tulip Mania and Bitcoin
Now that we have a clear picture of what the tulip mania and Bitcoin are, we will list the main differences below. There are many more differences between Bitcoin and the tulip mania than there are similarities.

Bitcoin not part of elite culture

The first difference has to do with one of the most important characteristics of Bitcoin, namely its decentralized and open nature.

Research has shown that the value of tulips in the 17th century was initially not commercial, but was part of elite culture. Capital, status and knowledge also played a role in this. Tulips symbolized wealth and power. The tulip trade was therefore mainly limited to more or less closed networks of wealthy citizens.

So that is the exact opposite of Bitcoin. Bitcoin has a decentralized and open character, so that power is not in the hands of one party and everyone can perform transactions among themselves. As a result, Bitcoin is not reserved for the elite and does not have a closed trading system. Anyone can buy Bitcoin 24/7, which makes Bitcoin a lot more accessible than the tulip bulbs in the 17th century.

No middlemen

The first difference is closely related to a second important difference. Due to the decentralized and transparent nature of Bitcoin, transactions can be carried out without intermediaries. That was not the case with the tulip trade in the 17th century. Not everyone could just buy and trade tulips. This was done through intermediaries and the entire trade was therefore not transparent, as was the determination of the price. There were many tulip traders, who influenced the price in many ways.

Bitcoin can be traded on many different platforms without intermediaries and anyone can see the price, leading to a transparent price. You can see exactly how much Bitcoin is worth at any time.

Bitcoin Moves on Cycle

The tulip mania lasted for several years, with hype starting around November 1736 and peaking in February 1737. After the price collapse, the tulip trade largely disappeared and prices remained low. A new all-time high was never reached again.

Bitcoin, on the other hand, has been around for 14 years and, as mentioned, is moving in a cycle in which a new all-time high is always reached. After the price collapse in 2014 and 2018, Bitcoin trading has only increased and we saw another massive rebound. It is therefore expected that this will repeat itself in 2022-2025.

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