The concept we call an economic bubble actually means situations where the price of an asset increases rapidly and this rapid rise is followed by a rapid decline. If we look at today’s examples, we can say that the NFT market, which rises with great interest and then falls sharply, is also described as a bubble.
The first and most interesting of the economic bubbles, of which there are many examples from past to present, is “Tulip Mania”. Before going into the details of this economic bubble called Tulip Mania, we can also say that this event is similar in some respects to today’s examples such as cryptocurrency and NFT markets.
This economic bubble, known as Tulip Mania and occurring in the Netherlands in the mid-17th century, has found its place in history as an interesting example of how people’s emotional impulses and financial goals intertwine.
The story begins with tulips traveling from the Ottoman Empire to the Netherlands.
The Netherlands became acquainted with tulips when the Dutch ambassador took tulip bulbs with him when he returned after his visit to the Ottoman Empire during the reign of Suleiman the Magnificent.
Not long after the Dutch were introduced to tulips, tulips were loved by the public and became a flower that attracted a lot of attention from the Dutch.
Tulips attract great attention and become a symbol of status and luxury.
So much so that the rich people of the Netherlands see tulips as an indicator of their wealth and status and start displaying these tulips in their homes.
With the increasing demand, tulips begin to attract the attention of the middle class and turn into an investment tool.
With the ever-increasing demand, tulips are becoming a sector and markets are beginning to emerge for their purchase and sale.
Tulips, which have become a kind of commodity, are traded on stock exchanges, and the interest in them as an investment tool is increasing so much that investors even make long-term transactions, thinking that the price of tulip bulbs will increase even more.
Prices are increasing so much that, as the end of the tulip mania approaches, the price of a tulip bulb reaches levels equivalent to the entire annual wage of an employee.
Of course, the tulip market also encounters the tragic end that every economic bubble encounters, and the bubble bursts!
In other words, stagnation begins to prevail in the market and those with tulip bulbs begin to find no buyers.
As everyone in the market wants to dispose of tulip bulbs in order to avoid losses, a decline in prices prevails and investors who have tulip bulbs face huge losses. So the tulip bubble bursts and the tulip market crashes…
Does Tulip Mania remind you a bit of the cryptocurrency and NFT markets?
You may remember that investors have shown great interest in the markets for virtual assets, especially the NFT market, in recent years.
This situation had become such that many people had positive feelings that prices would rise and saw these markets as opportunities and hoped to get a share of the cake; They had invested in the virtual products in question, some of them had won, while many had suffered great losses.
So much so that even virtual works of art called NFTs, from virtual plots of land, found buyers at very high prices. Currently, the prices of most of them are well below expectations…
So what does the research say?
Research has concluded that although there are some similarities between Tulip Mania and Bitcoin, there is no relationship between these two markets and it is not correct to identify the two markets in question.
According to researchers, who state that the markets in question should be evaluated according to the conditions of the period, since today’s conditions and the conditions of the 17th century are not the same, it would not be correct to say that these two markets are similar in every respect.
When we look at the irrational behavior of investors, it is possible to say that there are some similarities.
So, although the tulip bulb market and crypto asset markets are not qualitatively related, they have some similarities in investor behavior.
For example, the person who bought tulip bulbs for a price as high as a worker’s annual wage to display in his home seems to exhibit somewhat similar behavior to Justin Bieber, who bought the “Bored Ape” NFT for $1.3 million and lost nearly 90% of his investment. What do you think?
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