In the 17th century tulips were brought from Turkey and introduced to the Dutch. The novelty of the new flower made for high demand and this was reflected in the price. After a while the tulips contracted a non-fatal virus which altered them causing ‘flames of colour’ to appear on the petals. The wide variety of colour patterns increased the rarity of the flower. Therefore the tulips, which were already selling at a premium began to rise in price dramatically. Soon, everyone began to deal in bulbs, essentially speculating on the tulip market, which was believed to have no limits.
The buyers began to fill up large inventories ready for the growing season, further depleting supply and scarcity.Prices began to rise fast and people were trading their land and life savings just to get more tulip bulbs. As happens with speculative bubbles, prudent people decided to sell and crystallise their profits. The domino effect took place and eventually there was more sellers in the market than buyers and the price plummeted.
It is currently all over social media regarding the rise of Bitcoin ( Aug 16 2010 Bitcoin was at $0.07, if you had bought $100 worth then, seven years on it would be worth just under $6 million). Why the phenomenal rise?
-More and more people are liking the idea of Bitcoin and how it is in their control and not under the influence of central banks.
-Cash is no longer king. People are moving with the times and the vast majority of transactions are done electronically.
-People have a greater deal of understanding with regards to how Bitcoin works, with a knowledge on its systems and processes such as mining and the blockchain.
But just how far will Bitcoin go?
As long as demand continues to rise and a growing number see it as ‘money for the future’, Bitcoin may outlast the Tulip mania period of the 17th century!