What is tulip-mania, and why are experts recalling it now?

Tulips and cryptocurrencies have more in common than one may initially think. According to some market experts, cryptocurrencies are sitting in the middle of a pricing bubble, much like the one seen during the tulip-mania of the 1600s. The commonality stems from the fact that in both instances, there is a significantly overheated market for a product that has limited usage and little inherent value.

More specifically, tulips have little usage as a commodity other than providing aesthetic value. Similarly, cryptos have seen a growing use case, which remains limited and does not completely justify the sky-high prices of some cryptocurrencies. Thus, there is still large ambiguity looming over the innate value of a product that investors so vehemently demand.

If you are having a hard time understanding how something as trivial as a tulip can be compared to the booming market of cryptocurrencies, then picture this: In 1634, buyers purchased tulip bulbs for amounts sufficient to buy an entire house! This highlights the major challenges that can arise out of faulty market perceptions on the valuation of a commodity. The tulip fever was such pertinent that some individuals took out loans to resell the flower for a profit.

The massive hype surrounding tulips took shape in the Netherlands as buyers perceived them to be an exotic and rare class that could only be imported from abroad, more specifically, Turkey. Any individual living in the present day will know that the same is not true in the current context, and this was a major oversight back in those days.

Read the complete article at www.kalkinemedia.com.


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