To compare bitcoin (btc) to the Dutch tulip bubble is to perpetuate a fallacy. technology evolves faster than nature, and decentralized networks have more financial utility than a bouquet. bitcoin is a technology, tulips are plants, and no picky person would push the comparison much further.
tulipo mania, a 17th century market bubble in which the price of flower bulbs rose due to speculation by Dutch investors, resulted in a big crash. prices exceeded six times the average annual income of the time. the rarest light bulbs became one of the most expensive items on the planet.
Reading: Tulip bubble vs bitcoin
Even though the bitcoin network has been operating since 2009, its comparison to the tulip bubble continues ad nauseam. last february, the british economist and member of the council of the european central bank gabriel makhlouf, speaking of bitcoin, trite reminded us: “three hundred years ago, people put money in tulips because they thought it was an investment”.
Related: Forecasting the Bitcoin Price Using Quantitative Models, Part 4
Time and time again, bitcoin mavericks use tulip mania to justify their short-sighted expectations. Stories of tulip mania were popularized by Scottish journalist Charles Mackay in his 1841 memoir of the extraordinary popular ravings and madness of crowds. as mackay wrote: “golden bait dangled temptingly before the people, and one after another, they scurried towards the tulip markets, like flies round a pot of honey”. He continued: “nobles, citizens, farmers, mechanics, sailors, footmen, maids, even chimney sweeps and old clotheslines, dabbled in tulips.” however, when the tulip bubble burst in 1637, mackay claims it wreaked havoc on the dutch economy.
While the absurdity of the situation makes for a good story, scholars have noted that Mackay’s account of tulip mania may not even be true. this version of events, in particular, is not supported by historians. Anne Goldgar, Professor of Early Modern History at King’s College London and author of Tulipmania: Money, Honor and Knowledge in the Dutch Golden Age, explains why Mackay’s version doesn’t add up.
“It’s a great story, and the reason it’s a great story is that it makes people look stupid,” says Goldgar, who laments that even a serious economist like John Kenneth Galbraith parroted Mackay’s tale. in a short story of financial euphoria. continues:
the dotcom bubble
In addition to the Dutch tulip mania, bull markets in blockchain technologies are sometimes dismissed as a dotcom-like bubble. this is a better comparison, albeit inaccurate. in all its forms, including crypto, defi or non-fungible token, the internet of money has yet to enter a bubble stage or demonstrate all of its use cases. we are in the mid-nineties, equivalent to the dotcom era, and nowhere near the bubble stage.
Related: Are cryptocurrencies approaching their ‘netscape moment’?
Furthermore, the impact of the dot-com bubble on humanity was far less than the impact of the internet, a pattern that blockchain is likely to follow, especially when compared to tulip bulbs. Previous bull markets in crypto have had far more significant implications than price gains. In 2013, the world recognized that bitcoin exists. in 2017 and 2018, they recognized that cryptocurrencies exist. given that too many 2017 projects turned out to be nothing-burgers, it seems that many projects were simply there to raise money, that period is nothing more than a preview of what is to come.
doesn’t match tulip mania
The recent 2020-2021 bull market, the first after the initial coin offering (ICO) mania, was never the big bull market that so many expected. rather, like 2017-2018, it was another showcase of what the future could be, putting blockchain in the spotlight even more.
During the forthcoming bull market, which is probably a couple of years away, leading institutions will incorporate DeFi and crypto. This process has already started. In the meantime, employees at FAANG (Facebook, Amazon, Apple, Netflix, Google) see the writing on the wall and quit in droves, looking to build out the crypto landscape with intuitive products. Anyone in finance should be exploring DeFi and thinking, “I am going to lose my job if I am not careful.” The Winklevosses once stated that every FAANG company will have its own crypto project, a process known as hyperbitcoinization.
This exodus to defi hints that blockchain is the future of fintech, not just a bubble. we are still so early. During the dot-com boom, people in tech started leaving the companies they worked for and started building their ideas and challenging the user experience (UX) and user interface (UI) of the time. Subsequent improvements and UX and UI design simplified the internet and eventually brought it into every home. brilliant blockchain programmers and developers are pushing the envelope in so many verticals. but very few are pushing the limits of ux and ui. that’s next.
Related: To accelerate cryptocurrency adoption, we must first improve the user experience
Because the blockchain ux and ui are not particularly easy to use, the average institution will not yet be able to adopt and integrate the system into their pre-existing processes. Having gone to the greener pastures of blockchain, talent from Silicon Valley and Wall Street will start to push things forward. top-tier funds and projects are thinking about improving the user experience and user interface of blockchain for the next showcase.
once technologists realize that blockchain is the future, they will bring a unique skill set that will push the boundaries of the internet with crypto ux and ui. Just like in the dot-com era, technology will become easier to use and will appear more frequently in everyday life.
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