Way back in 1636 when ye old Dutch men walked around with top hats and linens, they craved for little orbs of mother nature called tulip bulbs. I have no idea why. But the bulbs were booming. Maybe it was the color, maybe it was pure hype, perhaps it was even FOMO. The bourgeois would sip tea with their friends and someone would say “Oh dear friends, you must see my tulips. Thou tulips are incredible and aren’t you jealous?” By the end of the tea party everyone wanted a tulip bulb. At one point, a single tulip bulb is said to have sold for the equivalent of $15 million.
Today, I hear everyone comparing Bitcoin and other cryptocurrencies to the Tulip Bubble. There are so many haters. They scream that Bitcoin is fake or not real. They exclaim that this sudden and dramatic rise makes no sense. I do not have a side in this waged war of bubble calling but I find it interesting to watch. I now see charts like this almost daily:
But just because an asset is following the trajectory of another asset does not mean the assets are alike. It also does not mean they’re different. There’s generally more to the story and you need to find out why they’re similar and why they’re different. Mark Twain once wrote:
“History never repeats itself, but the Kaleidoscopic combinations of the pictured present often seem to be constructed out of the broken fragments of antique legends.”
When you think about all the bubbles that mankind has seen since the species first stepped foot on Earth, also think about the accessibility of those bubbles. Shall we look into a few examples? Let’s:
- The South Sea Trading Bubble of 1719 was mostly accessible to those who lived in Great Britain and who had access to a broker or tradesperson. It was also only known about by those who had access to newspapers or lived near people who sold stock on the streets called, “a night singer of shares.”
- The great Tulip Bubble was a Dutch phenomenon and partly only those who were in a high class of living could gain access to the bulbs. Bulbs were also traded physically and in person so you literally had to be there to play the market.
- The Dot-Com bubble swept through most of the United States but it was those who had an Internet connection and a broker who could truly speculate the fastest and put the most money on the line. Remember the baby at the computer?
In the case of Bitcoin, there’s one thing that’s very different from all the other bubbles. It’s something Ye old Dutch man did not have, nor the night singer of shares, or the eTrade baby from the Dot Com Bubble. It can be explained with one word: accessibility.
Yes, Bitcoin could be a bubble, but perhaps it has yet to really even start. I would argue that for the first time ever, the entire Planet has access to one piece of mania and at anytime they please. Your friend somewhere in Japan playing League of Legends like a maniac gamer can download a Bitcoin app and buy just like your friend in New York City. The same goes for your friend in Venezuela (UPDATE: Nov 30 someone sent me this Tweet):
Cryptocurrencies like Bitcoin are accessible across the world and at a scale never seen before. So while it might someday be a bubble, it’s possible that day is moons away and if it finally crashes, it could go down as the biggest bubble ever.
Thanks for reading! If you enjoyed it, subscribe to my email here and I’ll send you some of my other writings and notes. Make sure you’re also following me on Twitter and StockTwits. If you want to read more, check out the links below: