Tulips & Crypto: A Cautionary Tale From The Past

jobless-joe (29)in #cryptocurrency • 7 years ago (edited)

It seems that every day there is a new cryptocurrency or blockchain technology that I am learning about. There are claims of glorious technological feats that will soon be achieved; decentralized cloud storage, streamlined and comprehensive reporting of Food Supplies; even a global decentralized supercomputer. The possibilities seem endless, and it is so easy to get caught up in the hype right now. Did you know that this growing market can loosely be compared to the everyday tulip? Even though these two things are completely different, the history of this familiar plant can teach us something we can use as we decide what crypto to spend our time on.

We're going to throw things in reverse and take a trip to the dutch golden age. Tulips were being brought from Turkey to the Dutch in record breaking amounts. This new flower was unlike anything they had ever seen before, and the price was showing. You saw the price of a single bulb being traded for an onion or carrot one day, and the next it go for a cow. Something was definitely happening here.

Then, a new element came into play; the tulips started to contract the mosaic virus. That might sound like the part of the story where the market crashes, but this virus added various new colors patterns that made these flowers even more sought after. This of course made the price go even higher, seeming to not even have a stopping point. The demand was so much that the supply for the season was soon depleted. No one would be able to get their hands on those sweet tulips for a whole year! People were trading entire estates for one tulip bulb. Everyone was liquidating their assets and buying tulips because that was where the money was at, plain and simple.

What goes up must come down, and reality soon set in. The speculation had been incorrect, and one by one people started selling their tulips. The ones who got out first made a decent profit, but the price was crashing at an alarming rate. The bulbs that they had sold their houses and goods for were now almost worthless. Dealers would not honor contracts, and not even the government could help due the the instability of the market. Even the people who got out first would have to deal with the depression that followed.

Now am I advocating that you get out now and never look back? Of course not! We all know that if we don't learn from our past we are doomed to repeat it. So it is in our best interest to keep this in mind as we venture forward into this crypto-craze. For every coin that will actually be worth something one day, there will be piles of trash-coins that have no real purpose at all. There has been speculation of Bitcoin reaching highs of anywhere from $3,600 all the way up to $500,000; you may even get a good show on national television at that high value too!

I don't doubt that Bitcoin, Ethereum, and other various blockchain technologies will take off to values higher than where they are today, but that does not mean all of the others will. So keep all of this in mind while you're looking at what to invest in this week, and don't end up with some worthless bulbs one day!