The Curious Case Of Tulips

Cars, real estate, tech gadgets, diamonds are some of the things people would be crazy to buy today(considering they have the money!), but in 1630’s people went gaga over Tulips, to the extent that they were ready to trade real estate, jewellery, life’s savings, and what not, all for just a tulip bulb. Later on, this came to be known as the ‘Tulip Mania’ or the ‘Tulip Fever’.

Market Crashes

The Turkish introduced tulips to European countries in the early 16^th century. Tulips were back then viewed as the GOAT among flowers and naturally had higher prices. Some time later, tulip flowers were infected by a virus called the mosaic virus which caused dual colors in the tulip petals and made the tulips even more beautiful with . In some places, tulips were in given as dowry. Soon there was a widespread demand of tulip bulbs and due to the common economic principle of price and demand which states that as demand increases, prices go up, the prices of tulip bulbs soared. People started trading tulips to make money and this soon led to a tulip bubble. Just like a bubble that rises in the air first and then bursts, economic bubbles are characterised by a sharp rise in prices of a commodity and then a steady fall in the price along with people following in the footsteps of prominent investors.

Gorgeous tulips led to the bankruptcy of people because people seemed to forget that tulips are flowers and flowers wilt, so if a person traded their entire life’s savings for a tulip, they were at a great loss. Not one but innumerable people had invested in tulips by seeing other people investing in them. Tulip frenzy is one of the earliest examples of economic bubbles and as the great saying goes, history does indeed repeat itself. In 2008, the Great Recession happened due to the Real Estate Bubble, here instead of tulips, people bought houses on loans and later defaulted on them causing the American Economy to plunge.

The crypto case-

In 2018, the Crypto currency(Bitcoin) bubble burst after crypto reached its peak and then prices dropped by 82%. Market crashes happen today and have been happening since the 17^th century’s Tulip Mania, but what people can do is learn from these and before investing in anything weigh its pros and cons and not blindly invest and safeguard yourselves from these bubbles.