Tulip Mania: What is Tulip Mania?
The tulip frenzy is a major commodity bubble that occurred in the 17th century when Dutch investors began buying tulips indefinitely and pushed their prices to unprecedented highs.
Tulipmania is a speculative bubble that originated in the 17th century when Dutch investors began buying tulips indefinitely and pushed their prices to unprecedented highs.
– During tulipmania, the average price of a flower exceeded the annual income of a skilled worker and at that time exceeded the price of some houses.
The example of tulipmania is now used as an example for other speculative assets such as cryptocurrency or dotcom stock.
– Tulipmania reflects a normal cycle of bubbles, irrational bias and group mentality that causes property prices to collapse from unrealistic levels to ultimately over-represented prices.
Some historians have argued that the actual tulip bubble was too small, but later storytellers exaggerated it.
Tulips first came to Western Europe in the late 1500s and became a fashionable status symbol for wealthy Dutch merchants. Some bulbs were found growing with unexpected ‘broken’ colors which were extremely valuable due to their rarity. When farming techniques improved, more and more people started collecting and betting tulip bulbs. Eventually, stock traders joined, so that the average price of a flower would be higher than the annual income of a skilled worker and at that time the price of some houses. Prices then peaked and then suddenly crashed within a week, destroying several tulip sellers. Tulipmania (also known as the Dutch Tulip Bulb Market Bubble) is a model for the normal cycle of the economic bubble.
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