“Can someone write a book comparing Bitcoin to tulips already? My dad is stuck on this comparison” - Ben Justman

If you have been in Bitcoin for any period of time, you have heard the Tulip Mania comparison. My goal here is to write a simple, succinct, beginner-level critique of the comparison between Tulip Mania and Bitcoin. I will do little to no research and write off the cuff.

Tulip Mania

Tulips were the definition of a “bubble” from 1634-1637. Here is a summary from Perplexity of the height of the Tulip Mania bubble:

“By winter 1636-1637, demand reached unprecedented heights. A single bulb could sell for the price of a luxury Amsterdam house—over ten times a skilled worker’s annual income. People mortgaged homes, sold businesses, and borrowed heavily to buy bulbs, convinced prices could only go up. Tulip contracts were even traded on stock exchanges, making ordinary citizens overnight speculators.”

Does this sound a lot like bitcoin? Let’s first talk about how bitcoin hype and tulip mania are similar.

Both tulips in the 1600s and Bitcoin today experience volatility and speculation. People get excited. They over-leverage. Some people have lost everything gambling on the price of bitcoin on any given day. Just like with tulips. Similarly, we see incredible hype from “crypto bros” that resembles tulip mania. There are many people who don’t even understand “crypto” who see it as a get-rich-quick opportunity. People don’t even understand what they are buying, they just have fear of missing out (FOMO).

What I find interesting about this comparison is that people love to compare bitcoin to tulip mania, but often don’t compare it to other famous bubbles. For example, the great depression was caused by a wall street bubble fueled by the roaring twenties. Then you have the dot-com bubble fueled by speculation on internet stocks, and of course the housing bubble in 2008 among many others.

In other words, people love to compare bitcoin to Tulip Mania while ignoring that bubbles are part of human nature and bubbles have occurred across all asset classes for various reason throughout human history.

Bitcoin can experience volatility, speculation, hype, and FOMO just like Tulip Mania, wall street, internet stocks, and housing.

The big mistake that is being made by skeptics who compare tulip mania to bitcoin is that **they focus on the hype, volatility, and speculation rather than the asset itself. **When you dig down into tulips vs bitcoin instead of tulip mania vs bitcoin hype things get much more interesting and the comparisons break down from there.

The Dot-Com Bubble

In the 90s, we got the internet bubble. Many people didn’t understand the internet or the companies that would be built on top of it. But everyone became a speculator.

The speculation and hype in the late 90s reached a fever pitch. Anything with a .com in its name was exploding on the stock market. The FOMO was real. Included in this was Amazon stock. Amazon hit a stock price of $113 per share in early 2000 before crashing to $5 a share. That’s a 94% plunge.

There is a classic video of Jeff Bezos discussing the dot-com crash. It is a much watch. In this video, he discusses how people came to him at the time and said “what’s wrong with Amazon!” His response? While the stock plunged from $113 to $5, the fundamentals were looking better than ever. More customers. More profit per customer. Amazon the business was thriving, while Amazon the stock was crashing.

At its trough, Amazon was worth a total market cap of $5 billion dollars. Today, it is worth 2.3 trillion. That is an increase of 41,200%.

What’s my point? In 2022 people kept telling me the bitcoin bubble had crashed (to $15,000) and the Tulip Mania comparisons had been warranted. I kept pointing them to that Jeff Bezos interview about Amazon. Bitcoin “the price” was crashing, Bitcoin “the asset” was thriving.

And the price was always going to bounce back. How did we know? Because the value proposition of Bitcoin is nothing like the value proposition of tulips. Just like the value of Amazon stock was not like other internet stocks.

Bitcoin Versus Tulips

My point in bringing Amazon into the discussion is that not all bubbles and crashes are equal. Bubbles can happen in valuable, worthwhile assets and companies. You can’t compare the Tulip Mania bubble with the Amazon bubble of 2000 nor with the perceived Bitcoin bubble of today. Instead, let’s ask Perplexity to compare Tulips and Bitcoin directly:

As you can see, people aren’t comparing bitcoin and tulips, they’re comparing tulip mania and bitcoin hype. If you did this with Amazon at $5 a share, you would have been wrong.

I will not go into the value proposition of Bitcoin in this article. The goal here is to address the Tulip Mania vs Bitcoin comparison, as it is unwarranted. Instead, let’s compare Bitcoin and Gold. Do you think Gold has value? The market sure thinks so. Why does it have value? It doesn’t do anything, but it is the largest asset in the world.

Bitcoin is a $2.2 trillion asset. It has been around for 16 years. It is a scarce, global, monetary network. Let’s stop comparing it to a flower. It makes no sense.

And instead of talking about the tulip bubble, let’s talk about the everything bubble being fueled by careless government spending. How do you think that one ends?

Thanks for reading my first article ever. I hope you enjoyed it.