In 2002, Thompson an economist considered that the rise was natural since people were coming back from the war and wanted to earn more money, and faster to compensate their losses. Most of the facts before were reported by Mackay in his book “Extraordinary Popular Delusions and the Madness of Crowds”, yet no one really knows what happens in detail and there is definitely a lack of real data to perform any advanced analysis. A token based on a New York Times column about NFTs by Kevin Roose sold in an online auction last week for 350 Ether, more than $500,000.
The Prices increased so high that it was obvious that the rates weren’t reflecting the actual value of tulips. Prudent people realized the situation and started selling it to crystallize the profits. Soon, everyone started selling it, and there were no potential buyers. The price began to dive, causing people to panic and sell regardless of losses.
Dutch speculators at the time spent incredible amounts of money on bulbs that only produced flowers for a week—many companies formed with the sole purpose of trading tulips. This means that the best of tulips cost upwards of $1 million in today’s money (but with many bulbs trading in the $50,000–$150,000 range). By 1636, the demand for the tulip trade was so large that regular marts for their sale were established on the Stock Exchange of Amsterdam, in Rotterdam, Haarlem, and other towns. The Dutch tulip bulb market bubble was one of the most famous asset bubbles and crashes of all time. Nearly a century later, during the crash of the Mississippi Company and the South Sea Company in about 1720, tulip mania appeared in satires of these manias.
Word of mouth is also very powerful in the context of feeding bubbles, and today’s technologies make it almost instantaneous. The fastest ICO raised millions within minutes, for example, Brave raised $35millions in 30 seconds. A lot of projects raised millions but many of them were scams that used the power of marketing and social media to create hype around their product. The thing is, the crypto ecosystem is vast and with a lot of very different products. Most of them never existed before so they don’t have any “referential” value to consider their pricing as uncorrelated to its intrinsic value. The only aspect that you can see that could reflect a bubble is the FOMO and the number of investors increasing.
Native to Central Asia, the tulip was particularly prized in the Ottoman Empire. Even today, the tulip retains its place of honor in a streamlined design on the sides of the airplanes in the Turkish Airlines fleet. The flower eventually made its way to the Dutch Republic, where it quickly became a hugely coveted possession, an exotic import that captivated the richest merchants who were experiencing unprecedented wealth during the Dutch Golden Age.
“It’s not a story of wild hysteria and madness”
Whoever masters the power of the internet’s attention could harm the economy dangerously. So when they hear about another cryptocurrency, they sometimes don’t bother to look in detail at what this product reflects and they buy it with the hope of it outperforming Bitcoin. The perfect illustration of the danger of this is the 2017 ICOs golden age. It should also be pointed out that febrile speculation in assets that have no physical existence has flourished during epidemics, when people spend a lot of time indoors. Tulip mania coincided with an outbreak of bubonic plague in the Netherlands that killed a fifth of Amsterdam’s population between 1635 and 1636.
Beckmann in turn used several available sources, but all of them drew heavily from the satirical Dialogues that were written to mock the speculators. Mackay’s vivid book was popular among generations of economists and stock market participants. His popular but flawed description of tulip mania as a speculative bubble remains prominent, even though since the 1980s economists have debunked many aspects of his account. As the flowers grew in popularity, professional growers paid higher and higher prices for bulbs with the virus, and prices rose steadily.
thoughts on “Tulip Mania at Keukenhof”
The price of Ethereum has more than doubled since Jan. 1, bloating the virtual wallets of investors, some of whom are splashing their Ether on NFT art. Kim Phillips-Fein, an ideologically motivated critic of market-based economies writing at the height of the dot-com bubble, complains that “trendy academics like to say that the tulip craze wasn’t a bubble at all.” Mackay’s famous account serves as a warning to all those who speculate in stocks, real estate, or commodities As investment brochures routinely say, “Past performance is no guarantee of future returns.” This was one of Jesse Livermore’s favorite books since its explanations of the madness of crowds could readily be applied to the market.
Looking at this situation, you can get insight into other bubbles in modern markets. Learning from the past is always a great way to prepare for the future. “The price increases in tulips pale into insignificance compared to the cryptocurrency phenomenon. This doesn’t mean bitcoin specifically is in a bubble; however, the other cryptocurrencies are.” In the 1600s, the Dutch currency was the guilder, which preceded the use of the euro. At the height of the bubble, tulips sold for approximately 10,000 guilders.
The Bubble didn’t last long
Basket of goods allegedly exchanged for a single bulb of the ViceroyTwo lasts of wheat448ƒFour lasts of rye558ƒFour fat oxen480ƒEight fat swine240ƒTwelve fat sheep120ƒTwo hogsheads of wine70ƒFour tuns of beer32ƒTwo tuns of butter192ƒ1,000 lbs. Of cheese120ƒA complete bed100ƒA suit of clothes80ƒA silver drinking cup60ƒTotal2500ƒThe modern discussion of tulip mania began with the book Extraordinary Popular Delusions and the Madness of Crowds, published in 1841 by the Scottish journalist Charles Mackay. He proposed that crowds of people often behave irrationally, and tulip mania was, along with the South Sea Bubble and the Mississippi Company scheme, one of his primary examples. His account was largely sourced from a 1797 work by Johann Beckmann titled A History of Inventions, Discoveries, and Origins.
While it was not a devastating occurrence for the nation’s economy, it did undermine social expectations. A large part of this rapid decline was driven by the fact that people had purchased bulbs on credit, hoping to repay their loans when they sold their bulbs for a profit. But once prices started to drop, holders were forced to sell their bulbs at any price and to declare bankruptcy in the process. But at the same time, tulips were known to be notoriously fragile, and would die without careful cultivation. In the early 1600s, professional cultivators of tulips began to refine techniques to grow and produce the flowers locally in Holland, establishing a flourishing business sector that has persisted to this day.
According to history and folklore, everyone from the lower to the middle class to the wealthy became cultivators and dealers in tulip bulbs. The height of the craze in 1637 saw prices soar as high as 10,000 guilders for one Semper Augustus bulb. This was the price of a mansion or enough for a family to live for half a lifetime. The sharp rise in prices created expectations for their further growth and attracted speculators who thought that trading bulbs would soon make incredible profits. But the tulip mania was a typical bubble that, when it burst, led to the first stock market crash in history.
As is usually the case in such booms, the inevitable bust followed. Traders began to question how much higher the prices could climb and suddenly adopted a more cautious approach — an abrupt reversal that resulted in disaster. In 1637, a tulip-specific virus called “Tulip breaking virus” caused multicolored flame-like streaks to appear on petals. Tulips that were originally a coveted luxury item, enjoyed a twenty-fold increase in price in just a month because of the rarity of petal patterns.
When Beckmann first described tulip mania in the 1780s, he compared it to the failing lotteries of the time. Thompson argues that the “bubble” in the price of tulip bulb forward prior to the February 1637 decree was due primarily to buyers’ awareness of what was coming. The lack of consistently recorded price data from the 1630s makes the extent of the tulip mania difficult to discern. The bulk of available data comes from an anonymous satire, Dialogues between Waermondt and Gaergoedt, written just after the bubble. Economist Peter Garber collected data on the sales of 161 bulbs of 39 varieties between 1633 and 1637, with 53 being recorded in the Dialogues .
But tulip mania was a historical event in a historical context, and whatever it is, Bitcoin is not tulip mania 2.0. And what of the much-vaunted effect of the plague on tulip mania, supposedly making people with nothing to lose gamble their all? Despite an epidemic going on during 1636, the biggest price rises occurred in January 1637, when plague was on the wane. Perhaps some people inheriting money had a bit more in their pockets to spend on bulbs.
According to Smithsonian Magazine, the Dutch learned that tulips could grow from seeds or buds that grew on the mother bulb. A bulb that grew from seed would take seven to 12 years before flowering, but a bulb itself could flower the very next year. So-called broken bulbs were a type of tulip with a striped, multicolored pattern rather than a single solid color that evolved from a mosaic virus strain. This variation was a catalyst for growing demand for rare, “broken bulb” tulips, which ultimately led to the high market price.
Strange Cases of Mass Hysteria That’ll Leave You Baffled
Using data about the specific payoffs present in the contracts, Thompson argued that “tulip bulb contract prices hewed closely to what a rational economic model would dictate … Everyone in the Netherlands was involved, from chimney-sweeps to aristocrats. The same tulip bulb, or rather tulip future, was traded sometimes 10 times a day.
“That the tulip has become much more common on the one hand and on the other hand has been one of the most popular bulb flowers since 1800. That is of course special and is mainly due to the many varieties,” says Looijesteijn. Straw and plastic cover the fields to protect the bulbs from freezing cold. But come back again in April, when rows of colorful daffodils, tulips and hyacinths shine here. Despite the fact that flower bulbs are now also grown in the north of North Holland, Drenthe and the Flevopolder. It certainly makes an exciting story, one that has become a byword for insanity in the markets.
Members of the “College” were predominantly well-heeled merchants with connections to the East India Trading Company who were just switching one speculative oriental Carriage Trade good for another. The Dutch economy thrived on its geographically central position between the European capitals and its exports were invariably luxury goods. Instead, the executive said that alternative digital currencies based on the bitcoin blockchain – which he called an “array of multi-colored variants” – were comparable to the tulip mania phenomenon. Not much economic data is available to corroborate the different narratives or myths surrounding the unusual tale of tulips.