Tulips & Bitcoin

February 2, 2018 by Gordon Advisors

Tulips.  The Dutch.  What do they have to do with Bitcoins and the current international community?  Harvard professor George Santayana once said; “Those who do not learn history are doomed to repeat it.”  For that reason, let me take you back to 1634 and Tulip Mania.

In 1593 tulips were brought to Holland from Turkey.  The Dutch loved this unique flower and their market thrived.  Fast forward about 40 years and the wonderous tulip really began to take hold amongst the Dutch.  They were selling at a premium and the tulips contracted a virus that altered the petals making a flame like color.  The premium prices took another jump up as the Dutch started buying up supply and searching for these special flame tulips.  Common folks wanting to improve on their position in life started trading more and more valuable items for these beautiful flowers.  Would you like me to work a week on your farm?  That will be one bulb please.  Will you take a fattened hog for a bulb – thank you!  A cow?  Absolutely for a precious bulb or two.

Many Dutch believed they could sell their tulip bulb inventory to unknowledgeable foreigners for a hefty profit, again, pushing the price even higher.  In fact, in one month the price increased 20-fold!  At the peak a person could trade a single bulb for an entire estate.  Then the bubble burst, and it wasn’t pretty.  At the end of Tulip Mania, a tulip bulb was worth no more than an onion.

Thinking about Tulip Mania reminds me of cryptocurrencies and bitcoin.  It may be a difficult button to push if you bought at the peak weeks ago – but if you have the opportunity, don’t wait until your computer-generated piece of history becomes nothing more than an onion.