By: Carolina Pérez
Recently I was asked what I thought about the comparison between the Tulip Bubble Craze and Bitcoin (crypto in general). My answer was simply that I have no clue what you are talking about, like most of the subjects about cryptocurrency.
There is this Tulip bubble phenomenon that is being compared online by various writers.
I found this really interesting video on youtube posted by TED-Ed on this topic. The Dutch Tulip Bubble Craze dates back to the 17thcentury. At the time this flower was considered an exotic flower and rare in the area this made wealthy people go crazy over this particular flower. The more people wanted it, the more the value of it, supply and demand. It got so insane that at some point its worth was equal to the amount people would pay for a mansion, yes a mansion.
According to Investopedia, this flower brought down the whole economy, “The bubble burst when a seller arranged a big purchase with a buyer, but the buyer failed to show. The realization set in that price increases were unsustainable. This created a panic that spiraled throughout Europe, driving the worth of any tulip bulb down to a tiny fraction of its recent price”. (read more)
So, what's an economic bubble?
"A bubble is an economic cycle characterized by the rapid escalation of asset prices followed by a contraction. It is created by a surge in asset prices unwarranted by the fundamentals of the asset and driven by exuberant market behavior. When no more investors are willing to buy at the elevated price, a massive sell-off occurs, causing the bubble to deflate." (read more)
Why compare it to cryptocurrency?
Digital currency is a creation that in the past few years has gained more popularity and more people interested in investing in them. In 2010 you could've bought a Bitcoin for USD 6,00 and in 2017 Bitcoin hit its peak rising to USD 19,340. The more popular it became and the more promising it grew; the more people were interested in it and buying it even at its highest value.
According to CNBC, "Bitcoin is in a "classic bubble" and has even gone beyond the "absurdity" of Holland's tulip bulb mania in the 1630s, widely followed investor Dennis Gartman told CNBC on Thursday”.
I honestly do not get why there is such a big fuss about bitcoin being compared to the Tulip phenomenon. First of all, I consider there is no way you can compare it being that they are two different things. I do understand the comparison, once understanding what an economic bubble is it all becomes much clearer. Many people want cryptocurrency to last a lifetime and, but it is still in its early stages and a volatile market. There is no way now to be sure of this; therefore people can also speculate and assume Bitcoin will eventually burst.
Whether or not you believe that Bitcoin or cryptocurrency, in general, is a bubble, it does have its similar craze that generally occurs in an economic bubble. I guess we have to wait and see what happens.
I believe there are three sides to all this; first I feel there are many people still against crypto for whatever their reasons may be, then there are those who are in the crypto world who feel the need to continually defend cryptocurrency because, let's admit, it gets attacked way too much. Finally, there are people like me who feel very much in between the whole drama and doesn't take opinions like this too seriously.
Hope you enjoyed it, feel free to comment.
Originally posted on DavinciCodes.net