How the inaccurate accounting of the tulip market hysteria has become a stand-in for current cryptocurrency bubble concerns.

When I first got into cryptocurrencies, I never imagined that it would lead to writing about flowers.

But these days, when reading about crypto markets, you can’t get very far before stumbling over some reference to the tulipmania that gripped the Netherlands in the 1600s. For some reason, many finance pundits and commentators feel like the 17th-century craze over tulips is a great way to explain cryptocurrency market dynamics.

But, is tulipmania really a good warning flag for the riptides of the free market?

How the innaccurate accounting of the tulip market hysteria has become a stand-in for current cryptocurrency bubble concerns. When I first got into cryptocurrencies, I never imagined that it would lead to writing about flowers. But these days, when reading about crypto markets, you can’t get very far before stumbling over some reference to the tulipmania that gripped the Netherlands in the 1600s. For some reason, many finance pundits and commentators feel like the 17th century craze over tulips is a great way to explain cryptocurrency market dynamics. But, is tulipmania really a good warning flag for the riptides of the free market? Hed The flower bulb bubble Last week, I wrote a little bit about how cryptocurrency regulations in development may or may not change the landscape of what digital assets look like and how they are used. While doing some background reading for that piece, I kept coming across the reference to the tulip mania that happened in what is now known as the Netherlands during the 1600s and allegedly cratered the whole Dutch economy. So, following a mild curiosity, I thought I would look into it some more. Turns out, the whole thing is a little bit of fake news. Summarizing secondhand what comes from the book Tulipmania: Money, Honor, and Knowledge in the Dutch Golden Age, tulips are native to the mountain valleys where China and Tibet intersect with Afghanistan and Russia. The flowers, recognized for their beauty and delicate intricacies, were brought to Istanbul where they were cultivated for centuries, eventually becoming the favored garden fixture of the emperors of the Ottoman Empire. During the latter part of the 1500’s, during a decades-long war with Spain, the Dutch were experiencing a demographic and cultural shift. International commerce and trading were taking off at the time, creating a crust of wealthy merchants and traders living in Dutch cities. The profits from these new ventures funded new indulgences. At the time, social and cultural interests leaned toward nature and things that were exotic, which intersected perfectly around tulips. And not just any tulips, Dutch traders were particularly interested in broken tulip bulbs, which is a variety of flower that produces patterned or multicolored petals, which are actually the result of a virus. Merchants attracted investors, formed specialized companies, and started pumping broken tulip bulbs. All of which fits neatly into a crypto analogy. Prices for tulip bulbs rose to astronomical heights, but eventually the whole thing folded when the new bulb companies began defaulting on their payments to traders. The fallout from the collapsed tulip trade had larger financial ripples and eventually led to a stagnate economy. That’s the way the story has gone up until this point. But, in an interview in Smithsonian magazine, Anne Goldgar, the professor of early modern history at King’s College in London, who wrote the book Tulipmania, the bursting of the great tulip didn’t have the dire economic consequences that were originally reported. “There weren’t that many people involved and the economic repercussions were pretty minor,” Goldgar told Smithsonian. “I couldn’t find anybody that went bankrupt. If there had been really a wholesale destruction of the economy as the myth suggests, that would’ve been a much harder thing to face.” Hed Tulipmania: Tale of crypto warning, or fantastical flower story? While the exact details of the Dutch tulipmania might not be totally accurate, the value of the parable still holds up: People went a little crazy and lost some money. And we don’t need to look 400 years in the past to search for examples of what happens when economic bubbles burst. After all, we have seen bubble before — most recently, the housing bubble in the 2000s and dot-com bubble of the 1990s. The point, is that economics and markets do not always behave rationally and that participating and investing in the emerging cryptoeconomy should be done carefully. And, we should always check facts and do our own due diligence, even if the facts lead us down rabbit holes about flower trading from centuries ago.

The flower bulb bubble

Recently, I wrote a little bit about how emerging cryptocurrency regulations may change the landscape of what digital assets look like and how they are used.

While doing some background reading for that piece, I kept coming across the reference to the tulip mania that happened in what is now known as the Netherlands during the 1600s and allegedly cratered the whole Dutch economy.

So, following a mild curiosity, I thought I would look into it some more.

Turns out, the whole thing is a little bit of fake news. Summarizing secondhand what comes from the book Tulipmania: Money, Honor, and Knowledge in the Dutch Golden Age, tulips are native to the mountain valleys where China and Tibet intersect with Afghanistan and Russia. The flowers, recognized for their beauty and delicate intricacies, were brought to Istanbul where they were cultivated for centuries, eventually becoming the favored garden fixture of the emperors of the Ottoman Empire.

During the latter part of the 1500’s, during a decades-long war with Spain, the Dutch were experiencing a demographic and cultural shift. International commerce and trading were taking off at the time, creating a crust of wealthy merchants and traders living in Dutch cities.

The profits from these new ventures funded new indulgences. At the time, social and cultural interests leaned toward nature and things that were exotic — interests embodied perfectly by tulips.

And not just any tulips, Dutch traders were particularly interested in broken tulip bulbs, which is a variety of flower that produces patterned or multicolored petals, which are actually the result of a virus.

Merchants attracted investors, formed specialized companies and started pumping broken tulip bulbs. All of which fits neatly into a crypto analogy.

Prices for tulip bulbs rose to astronomical heights, but eventually the whole thing folded when the new bulb companies began defaulting on their payments to traders. The fallout from the collapsed tulip trade had larger financial ripples and eventually led to a stagnate economy.

That’s the way the story has gone up until this point. But, in an interview in Smithsonian magazine, Anne Goldgar, the professor of early modern history at King’s College in London, who wrote the book Tulipmania, the bursting of the great tulip didn’t have the dire economic consequences that were originally reported.

“There weren’t that many people involved and the economic repercussions were pretty minor,” Goldgar told Smithsonian. “I couldn’t find anybody that went bankrupt. If there had been really a wholesale destruction of the economy as the myth suggests, that would’ve been a much harder thing to face.”

Tulipmania: Tale of crypto warning, or fantastical flower story?

While the exact details of the Dutch tulipmania might not be totally accurate, the value of the parable still holds up: People went a little crazy and lost some money.

And we don’t need to look 400 years in the past to search for examples of what happens when economic bubbles burst.

After all, we have seen bubble before — most recently, the housing bubble in the 2000s and dot-com bubble of the 1990s.

The point is that economics and markets do not always behave rationally and that participating and investing in the emerging crypto-economy should be done carefully. And, we should always check facts and do our own due diligence, even if the facts lead us down rabbit holes about flower trading from centuries ago.

Tulipmania and cryptocurrency bubbles