- Bitcoin has often (and incorrectly) been compared to one-off market crazes like Tulip Mania and the South Sea Bubble
- Such comparisons were already erroneous, but 2020 has well and truly killed off any such suggestions
- Institutional adoption and understanding has grown more this year than ever before
Bitcoin has had no shortage of detractors over the years. Some of the criticisms against it are valid, such as the processing speed and block size, but others are wildly inaccurate and stem from a lack of understanding. One of these is the suggestion that Bitcoin is the same as famous market bubbles such as the Dutch Tulip Mania and the South Sea Bubble. Bitcoin’s price action this year, along with the rationale behind its rapid ascent towards all-time highs, has finally exorcised any comparisons between Bitcoin and these famous boom-and-busts.
Tulip Mania Nothing Like Bitcoin Performance
As we outlined in a separate piece on the subject last year, the Dutch tulip craze saw the price of tulips and tulip bulbs soaring to vastly inflated levels in the early 1600s due to their popularity shortly after their arrival from Turkey. The tulip bubble burst in 1637 after a 200x increase over three years, leaving late buyers holding largely worthless bulbs. The price never recovered, and the example of Tulip Mania has been used to describe any short-lived craze, including Bitcoin.
As we summarized in our article, the comparison was already invalid prior to 2020 because Bitcoin had already gone through three of these market cycles in its twelve-year history. 2020 has put these comparisons completely to bed however, not just because of the emergence of its fourth price resurgence but because its use case had finally been cemented among those that matter.
Acceptance and Understanding has Fueled 2020 Rise
A tulip’s only use case is to look nice, which was why its price was never going to stabilize after its parabolic growth. The reason for Bitcoin’s rapid recovery this year from its boom-and-bust in 2017 is largely down to the fact that a growing number of influential people are starting to worry about a drop in the relative value of fiat currencies in the wake of the coronavirus.
Institutional acceptance of Bitcoin has been almost as parabolic as its growth this year, with its premise and use case both being researched and understood on a scale never seen before.
As a result, Bitcoin’s resurgence this year, coupled with the growing understanding of its basic principles, have finally allowed it to exorcise any comparison to one-off market cycles like Tulip Mania. This won’t top the uneducated from making these comparisons, but sometimes a lost cause is a lost cause, and at least those who matter are beginning to understand how inaccurate such comparisons are.