The Original of the Tulip Mania Story Simulated to Bitcoin


Bitcoin (BTC) has often been compared to the “tulip frenzy” by some economists and major financial players. So what happened behind the scenes of this tulip mania in the Netherlands? Could Bitcoin really be compared to the tulip bubble in the Netherlands in the 1630s?

Bitcoin has been the target of many criticisms from the day it was first released, to the times when it was climbing and until today. Many financial analysts called it a “bubble” as Bitcoin climbed to a record $ 20,000. This term bubble has often been used for financial assets that quickly burst and disappear after a short time, like flying bubbles blown by children.

Bitcoin was also compared to the “tulip mania”, which was the more sophisticated version of saying “bubble” in its early stages, and especially during the 2017 rally. Described as the biggest bubble in history; describing the dangers of this “tulip mania” free market in the Netherlands of the 1600s that economists and storytellers often like to tell; it turned into a story that needs to be made sense out of the story. With the analogy of the tulip mania, many other things were cited besides Bitcoin: the South Sea issue in England in the 1700s, the railways issue in the 19th century, the dot-com incident …

It is said that when tulips arrived in the Netherlands, the whole of Europe was dizzy; Everyone was fascinated by the extraordinary colors of tulips, and the man who ate tulip bulbs thinking that they were normal onions was imprisoned. A tulip was even more expensive than a luxurious and stylish mansion in Amsterdam. The tulip market and trade grew steadily. And eventually the tulip bubble burst. How real was this story, where everyone thought they could learn a lesson about the possible situations in the free market?

Neither gold nor diamond; only tulips

In the 1600s, many merchants engaged in international trade gathered in the Netherlands in port cities such as Amsterdam, Haarlem and Delft. The boom in international trade by sea brought enormous wealth to the Netherlands. Unlike the land-rich or overlord strata like the rest of Europe, the Dutch faced a new class enriched by trade.

After this enriched class had improved their basic conditions, they wanted to spend their money on something else as everyone else did: luxury products. The interest of the Dutch rich for the exotic and the luxury led the traders to move in this direction.

A single tulip bulb only lasts for about 1 week all year round. In addition to the labor that goes into keeping a single tulip alive for one week all year, the increasingly exorbitant prices also made tulips a “hard” pleasure. That’s why tulips were considered quite a luxury treat for that period.

Before they became an upper class delight in Europe, tulips were the symbol of the Ottoman Empire. So much so that Fatih Sultan Mehmet had even set up a gardener staff of 920 people for 12 tulip gardens. Dutch sailors and merchants admired these wonderful flowers when they came to the Ottomans and learned that tulips could be grown from onion seeds and decided to take it to their country.

Tulip bulbs entered the Netherlands and the madness began

The effect of tulips with their wonderful colors and delicate appearance was incredible in the Netherlands and then across Europe. Growing from a seed, a tulip bulb can take 7 to 12 years to bloom, while the tulip bulb itself can bloom next year. Therefore, traders decided to sell onions instead of seeds. One of the important points when selling tulip bulbs for tulip merchants was the tulips, which had more than one color rather than solid color. The tulip bulbs with these striped or bicolour leaves were most in demand.

Of course, it wasn’t certain that a tulip bulb would crack next year. This has become a gamble, as the time to break was not clearly predicted. In addition, naturalists got involved and tried to grow tulips that could grow in different colors, perhaps faster.

Demand for the ever-growing tulip trade increased rapidly and spot markets were created. While spot markets are known as the place where people go to buy currencies, securities or commodities, a tulip bulb at that time began to be treated as a financial asset because it received as much, perhaps more, demand than all of these.

Futures contracts used for tulips

From June to September, when tulips were in their dormant stage in their growth, people could go and buy or bring them directly. However, the flowers could not be moved between October and March as this could be detrimental to the growth of tulips. For this reason, buyers started using futures contracts to indicate their intention to buy tulip bulbs at a specific price at a convenient date.

As demand increased, tulip prices soared; Prices for onions and contracts were at record levels, higher than a worker’s wage and even the price of a mansion. Due to this growing demand and rising price, not only experienced traders but also ordinary people from worker to baker decided to enter the market in hopes of making a profit.

Many people started farming tulips on their own. Demand decreased as supply increased; For the European rich, the luxury and splendor of the tulip was spoiled. Contract prices dropped steadily and nobody wanted to trade tulips anymore. As a result, people have contracts that are 10 times more expensive than the current prices for tulips.

“Everyone wanted to benefit but the tulip bubble burst” or is it all an exaggeration?

According to the popular narrative that has been circulating for years, the tulip frenzy has affected every level of society in the Netherlands. Scottish journalist Charles Mackay published in 1841, “The ambition among the Dutch to have tulip bulbs was so great that the country’s industry was neglected; Even the lowest segment of the population has started the tulip trade. ” he told the incident.

Everyone, from the richest merchant to the poorest chimney sweep, was in a rush to sell tulips in the early 1630s; They bought onions at high prices and sold them even higher. But before the sector could even reach 1637, it saw the bottom. Almost everyone who traded tulips got into debt and went bankrupt. But according to the American historian, writer, and academic Anne Goldgar, the story is not exactly what it is told.

“I couldn’t even find a bankrupt person”

Receiving his education at Princeton University and Harvard University, 17-18. When Anne Goldgar, an expert in European cultural and social history of the century and Francophone culture in Europe, began research to write the book “Tulipmania:: Money, Honor, and Knowledge in the Dutch Golden Age” on tulip mania; He saw that what he was told and what he found did not match and was very surprised.

Goldgar encountered many documents stating that there were not many people involved in the tulip trade during this period and that the economic repercussions of the tulip trade were very small. Claiming that he could not even find a bankrupt person, Goldgar argued that if destruction had occurred as alleged, conclusive evidence of it would have been found.

According to Anne Goldgar, not all levels of society were affected and did not cause the industry to collapse in Amsterdam to match the story being told. Golger thinks that the onion speculation is not a massive “madness”.

If so, why is it called “madness”?

If we look at why this story is told in this way today, it is likely that it is a very enjoyable, appetizing and somewhat factual story in terms of explaining the danger of spot markets and futures contracts.

But going back to the past, it would not be wrong to say that the tulip trade was an unmissable story of “greed” for the church at that time. According to historian Simon Schama, all the stories from a sailor jailed for eating a tulip bulb to a chimney sweeper who got into business in the hope of getting rich came from propaganda leaflets published by churches in the Netherlands.

According to both Goldgar and Schama, these stories may have been exaggerated and turned into “madness” in order to convince people that achieving supposedly worldly luxuries would result in punishment.

Are the same conservative forces in place for Bitcoin now?

If we accept that the story of the tulip mania told is an exaggeration, it is assumed that the church for that period was behind it. So who today are referring to the tulip mania for Bitcoin?

Former presidents of large institutions are among those who make this reference. For example, Nout Wellink, former head of the Dutch Central Bank, commented on Bitcoin, “Sooner or later the curtain will fall”. Wellnik also used words like “speculation only” and “enthusiasm” for BTC. JPMorgan CEO Jamie Dimon said Bitcoin was a fraud and said, “Worse than tulip bulbs; He said, “It will not end well.” Nobel laureate economist Robert Shiller commented that Bitcoin really reminds him of the tulip mania. IMF advisor Nouriel Roubini criticized Bitcoin as “the mother of all bubbles” and “much worse than the tulip balloon”.

But when comparing Bitcoin and the tulip mania, there were points that these experienced and big names ignore. Tulips were sold solely for pleasure and luxury to the Dutch rich and then to the European nobles. Behind Bitcoin is a much deeper philosophy besides making money. This philosophy includes concepts such as financial freedom, transparency, decentralization and decentralization. In your opinion, who might want to call Bitcoin a scam today, as the church allegedly used the tulip mania to discourage the public from greed?


Please enter your comment!
Please enter your name here