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RE: Bitcoin is nothing like the Dutch Tulip Mania, you can’t just grow as many as you want

in #bitcoin7 years ago (edited)

That's not how the Tulip bubble ended though, it was not an increase in supply. The tulip bubble was not focused on ordinary tulips, although they did also rise in price. It was focussed on unique "breeds". However unlike regular "breeds", you could not reliably cultivate new examples of the same breed. We know today that this phenomenon was caused by a virus, but at the time the bulbs* were essentially unique and it was very difficult to reproduce the same "breed" twice.

So actually the tulips involved in the Dutch bubble were fundamentally scarce. Tulips were also never supposed to be a currency, the utility was as a prestige item. The bubble was based on speculative demand that French nobles would join in the mania to purchase these rare items, which never materialized substantially. The bubble ended not when farmers produced an oversupply, but when in February 1637 nobody turned up to a routine auction on tulip futures in Haarlem. Panic spread throughout the markets and the entire tulip economy was gone within a month. The actual reason nobody turned up was because of an outbreak of disease, nothing to do with tulips or demand for them, but speculative bubbles collapse on speculative reasons.

* What was interesting was that although you couldn't reproduce a specific flower reliably, the bulbs themselves had markings which allowed you to identify how the flower would turn out.