Titebi's Mania and Bitcoin: What is the difference between the financial bubble that developed 400 years ago and modern cryptocurrencies?

You will often hear the comparison that Bitcoin is a classic example of a financial bubble, just like the tulip mania of the 1600s. However, this comparison should not be superficial. The tulip bubble of that period is considered the first documented model of a financial crisis, which taught many lessons to the financial community of that day.

When a single tulip bulb exceeded the value of a house

17th-century Netherlands was the wealthiest and most developed country in the world. The booming international trade and commerce propelled the country’s economy forward. Market activity also brought about direct demand for ownership—wealthy residents sought luxury items like tulips. Tulips were no accident. The color and pattern of certain varieties were linked to a virus—an expression of mutation—making some plants uniquely rare. Some tulip varieties were so scarce that their lifespan was only a few weeks, which exponentially increased their value.

Merchants drove tulip prices to such heights that the cost of a single tulip bulb was equivalent to a skilled worker’s annual income or the price of a house. This was clearly more than anyone could reasonably expect.

Tulip futures: how artificially created demand exploded

Although physically owning a tulip was relatively difficult (only possible during the blooming season), market participants found a workaround. The introduction of futures contracts allowed people to engage in economic dealings with tulips—months in advance. Without owning the actual flower.

This innovation further inflated the market. It also added the element of black swan events—disrupting the rhythm and increasing risk aversion. As a result, more and more traders began to profit from tulips, while inventories started to critically explode.

February 1637: when prices turned around

Price-based assets reach a peak in speculative bubbles. In February 1637, an auction of tulips organized in Haarlem damaged the reputation of the artist. Buyers’ motivation waned. Fear quickly spread—within a few days, the bubble burst. Many investors suffered significant losses.

However, historians rose to prominence: it turned out that the precise financial details of the event were heavily criticized in historical records.

Historians claim: was the tulip mania a real bubble?

In 2006, economist Earl A. Thompson published a study based on research, in which he convincingly argued against the idea that tulip mania was a “bubble.” According to him, what actually happened was not a financial scam but a government covert attempt to regulate through options contracts. For a true bubble to form, external demand would have to be almost entirely driven by fictitious value.

Anne Goldgar, with her own talent and based on deep analysis of records, in 2007 suggested that the rise and fall of the tulip bubble was less about macroeconomic factors and more about micro-level speculation, which most of us tend to overlook. Her conclusion? The economic impact was minimal; at that time, there was no financial crisis in the state.

Bitcoin: a deciphered asset vs. temporary art

While the comparison between tulips and Bitcoin remains popular, there are clear fundamental differences:

Value preservation: Tulips lasted only a few weeks; then the bulbs darkened, and new plants became impossible. Traders only hoped that another tulip of the same color would be born from a new bulb. Bitcoin, on the other hand, is digital—nothing tangible. Its supply is fixed and capped at a maximum of 21 million units.

Physical security vs. cryptographic protection: Shipping tulips from trader to trader was risky—secure routes, insurance, and limited access to the flowers. Bitcoin is transmitted globally via P2P networks, and copying it is difficult.

Divisibility: Tulips were relatively limited in quantity. Bitcoin can be divided into tiny units—making it more suitable for commercial activity.

What can we learn from this?

Tulip mania was indeed a cover for the greed of financial markets, a general artifact during times of great change—when savings increase, leading to new liquidity and extreme speculation toward new assets or financial instruments.

But Bitcoin and tulips live in entirely different worlds. The biological value of tulips has been confined for 400 years, whereas Bitcoin is based on a digital environment rooted in the philosophy of real innovation. It has always been a tool—criticized as an asset—within a historical context that is largely irrelevant to our current market landscape.