Hacker News Reader

Comment by mmastrac | Hacker News Reader

Are we finally allowed to use the Tulip bulb analogy?

It might help propagate a story that did not really happen the way people think it happened:

> Research into tulip mania since then, especially by proponents of the efficient-market hypothesis,[17] suggests that his story was incomplete and inaccurate. In her 2007 scholarly analysis Tulipmania, Anne Goldgar states that the phenomenon was limited to "a fairly small group", and that most accounts from the period "are based on one or two contemporary pieces of propaganda and a prodigious amount of plagiarism".[11] Peter Garber argues that the trade in common bulbs "was no more than a meaningless winter drinking game, played by a plague-ridden population that made use of the vibrant tulip market."

Source: Wikipedia - tulip mania

"was no more than a meaningless winter drinking game, played by a plague-ridden population that made use of the vibrant tulip market."

Exaggerated or not, I think we can still use this line!

The South Sea companies are a much better, and more documented example.

I don't really know economics, but I believe they are quite different -- cryptocurrencies value is 100% speculative. Tulips at least have an inherent value as a decorative object. Even fiat currency can be used as toiletpaper in a pinch.

> Even fiat currency can be used as toiletpaper in a pinch

Even as origami sculptures, like the Venezuelan bolivar:

https://www.vozdeamerica.com/a/figuras-de-origami-hechas-con...

That 4 meter long cobra origami figure looks so cool (check picture 4).

Damn, that’s some astounding modular origami work.

Given how many hands your average bill has passed through, that sounds extremely unhygienic. I'd rather use a tulip!

I think it's difficult to call something 100% speculative or 100% not. Some individuals may buy something for speculation, while others may desire the utility. You can speculate on the price of soy beans (many do), but people also buy soy beans to use.

There are individuals who get some utility out of bitcoin (international money transfers etc.)

> There are individuals who get some utility out of bitcoin (international money transfers etc.)

What do you mean with money transfers?

I mean that when I've asked people what utility they get out of blockchain they mention the ability to send BTC overseas quickly and easily, to countries in which it's difficult to send money. I assume they're not lying about that use case.

They send nothing as BTC is not located anywhere. They buy and sell btc with fiat currencies, that is all.

In practice transferwise (now wise) is able to transfer money more easily and with much lower fees. At least if your needs match normal consumer needs.

This switches if you need to transfer millions of dollars, or you're trying to pay for something illegal. Which is why one of Bitcoin's significant real-world uses is for ransomware. It does indeed make it easy to launder millions of dollars of money across national boundaries.

https://www.npr.org/2021/06/10/1004874311/how-bitcoin-has-fu...

In practice there are things such as country-wide sanctions that make "regular" services not particularly reliable in some cases.

So the utility of crypto is to violate sanctions?

The utility of crypto is to transact without restrictions yes.

Among other things, sure. Given how many of them are in place for no good reason (e.g. Cuba) while significantly hindering quality of life for innocent people, I consider that a net positive.

> Even fiat currency can be used as toiletpaper in a pinch.

Hmm - but actually can it? Isn't destruction of bills forbidden? It certainly is in my home country.

Technically you are right, but I think it would have to be a really widespread issue before the government tried to do anything about it.

Still 6 orders of magnitude away, I'm afraid.

1 BTC = 20k USD

When 1 BTC = 0.009 USD, go ahead.

Whatever your view on the Tulip bulb analogy, that has no relevance to this story. This is a story of traders with bad risk management who blew themselves up with leverage. That is a story that has played out plenty of times in the past on every other type of asset (housing, stocks, FX) as well.

Tulip analogies are always apt & forever welcome. But looking at those ancient Dutch trading charts, there appears to be a single 99% crash, that occured in a single trading session I believe. BTCUSD has collapsed 70%+ at least 7 times.

It's global. There's always a new pool of money coming new.

And tulip bulbs are really only good for one thing. Extremely perishable, fungible, analog and centralized stores of value ;)

> There's always a new pool of money coming new.

FTFY: There's always been a new pool of money coming in, so far.

People have been using the Tulip bulb analogy for 12 years. What's stopping most people at this point is they understand the analogy doesn't fit.

Not until people begin cooking and eating their crypto.

My understanding of Dutch history (which isn't great) is that nobody ate tulip bulbs after the Tulip Mania ended. The famous instance of that occurring (to my knowledge) was during and immediately after WWII.

To be more precise, some Dutch from above the rivers (i.e. to the north of the "Waal" and "Nederrijn" rivers which divided the liberated south from the still occupied northern half of the country), especially the western part ate boiled tulip bulbs during the "hongerwinter" [1] (hunger-winter) of 1944-1945 when the Germans blocked food imports to that region in retaliation for the Dutch efforts (e.g. the national railway strike) to assist the allies in the liberation efforts.

The effects of the famine are still visible in the generation which grew up during that period and those which came after [2].

Source: I'm Dutch, my parents lived in this region and had their share of tulip bulbs.

[1] https://en.wikipedia.org/wiki/Dutch_famine_of_1944%E2%80%931...

[2] https://en.wikipedia.org/wiki/Dutch_famine_of_1944%E2%80%931...

Thanks for elaborating!

watch the "extra credit history" 5+ episodes about it. You will be shocked how wrong we all are about the tulip thing.

In 8 months, revisit.

Reply on news.ycombinator.com