It is believed to have been introduced to Europe in 1554, when an ambassador of the Holy Roman Emperor sent tulip bulbs and seeds to Vienna from the Ottoman Empire.
In 1637, the Dutch Republic erupted into a speculative fever over an unlikely item...the tulip.
Tulip Mania has become a legend synonymous with market euphoria and bubbles. But is this tale all it's cracked up to be?
Who's up for a story?
👇👇👇
It is believed to have been introduced to Europe in 1554, when an ambassador of the Holy Roman Emperor sent tulip bulbs and seeds to Vienna from the Ottoman Empire.
They soon became a coveted status symbol for the wealthy.
The Semper Augustus, with its colorful, flame-like streaks, was the most desired of them all.
Many financial innovations popped up during this time - the first stock exchange, for example.
But it was another financial innovation that would propel tulips into historical lore: the futures contract.
These contracts were freely-traded.
So in addition to the physical market for tulip bulbs, a thriving paper market was established.
Traders would meet in special taverns. In these taverns, no bulbs ever changed hands, just the paper contracts.
Speculative buying (buying on the expectation of further price increases) took hold.
The frenzy was on.
As with all financial bubbles, tulip mania became a self-fulfilling prophecy.
Rising prices beckoned new speculative traders into the market, which further drove up prices.
Prices continued to skyrocket through early 1637.
But as is common in speculative bubbles, the burst came suddenly.
When no buyers arrived at one trading session, the price of tulips fell precipitously.
Many refused to pay, arguing the paper contracts were unenforceable, leading to further panic selling and further price declines.
Tulip mania was officially over.
But many of his claims, including the devastating impact of the bubble on the Dutch economy, have been questioned or disproven.
In fact, she found only ~40 cases of people paying more than 300 guilders for a tulip bulb.https://t.co/INx2uwwozm
The Dutch Republic was not broken by the incident and very few people were truly impacted by it.
A fascinating historical incident, yes.
As sensational as the legend, no.
So as bitcoin continues its rise and the inevitable calls of "tulip mania" commence their lazy refrain, keep calm and carry on!
In the words of @PrestonPysh, "There go those tulips again..." https://t.co/gNWnDl1fBG
And turn on post notifications so you never miss a thread! https://t.co/JyqunaYxDe
1/ An Allegory of Finance
— Sahil Bloom (@SahilBloom) July 18, 2020
I have been posting a lot of educational (and humorous!) threads on finance, money, and economics.
My mission is simple: to demystify these concepts and make them accessible to everyone.
All of the threads can be found below. Enjoy and please share!
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