Beware Bitcoin's Bubble

History has plenty of precedents when it comes to economic trends rising and falling

- Sameer Singh

Throughout history, the world has been exposed to numerous economic bubbles. From Japan’s real estate and stock market bubble in 1990 to the dot-com bubble and the US housing bubble, each one had dire consequences for the economy and detrimentally impacted millions of people. Whether Bitcoin is destined for a similar fate remains a rife debate among investors and cryptocurrency experts alike.

Of all the economic bubbles, none is more infamous than the Dutch tulip bubble that gripped Holland in the early 17th Century.

Tulips, which were seen as a luxury item and status symbol, first boomed in popularity when a virus infected them, causing the petal colours of the flower to suddenly change into multi-coloured patterns. In 1634, speculators began to enter the market and saw how the new rich and middle class in Holland’s Golden Age were willing to pay extraordinary sums of money for a single bulb, and by 1636, stock exchanges were established to trade in bulbs and their future options.

Eventually though, in 1637, the market for tulips collapsed as people could no longer afford to purchase even the cheapest bulbs. This saw a tremendous drop in value and sparked a financial catastrophe for many. The flower still remains popular in Holland, but the story should serve as a reminder that markets can be extremely irrational at times.

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