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13 Dec, 2017 09:30

Bitcoin has surpassed Dutch Tulip Mania as biggest bubble ever

Virtual currency bitcoin has officially become the largest bubble in history, eclipsing the notorious "Tulip Mania," the speculative bubble that shook the Dutch economy before it collapsed in 1637.

According to analysts Howard Wang and Robert Wu from Convoy Investments, the bitcoin price has “gone up over 17 times this year, 64 times over the last three years and superseded that of the Dutch tulip’s climb over the same time frame.”

Their asset bubble chart released a month ago, went viral after showing that among all of the world's most famous asset bubbles, bitcoin was only lagging the 17th-century tulip bulb mania. The analysts have updated the chart to show the price of the digital currency has more than doubled in just a month. So, as of now, bitcoin has won the global bubble race, finally having surpassed the “Tulips.”

Talking about the main driver of bubbles, Wang said: “When we see a dramatic rise in asset prices, there is often an internal struggle between the two types of investors within us.”

According to the analyst, the first is the value investor, “is this investment getting too expensive?” The second is the momentum investor, “am I missing out on a trend?”

“I believe the balance of these two approaches, both within ourselves and across a market, ultimately determines the propensity for bubble-like behavior,” Wang was cited as saying by ZeroHedge.

While the effects of the tulip craze were devastating, bitcoin believers say the cryptocurrency’s rally is far from over and does not mean it is going to collapse, at least anytime soon. Investment guru Michael Novogratz told CNBC that "Bitcoin could easily be at $40,000 at the end of 2018.”

Novogratz, who has invested a quarter of his net worth in cryptocurrencies, added that bitcoin rival ethereum’s price “could be triple where it is as well.”

Talking about the possibilities of a bubble, bitcoin entrepreneur William Mook told RT that could happen but won’t be fatal as the cryptocurrency’s value “could not be permanently lost.”

Tulip mania was a period in the Dutch Golden Age of the 17th Century during which contract prices for some bulbs of the recently introduced and fashionable tulip reached extraordinarily high levels. At the peak of tulip mania some single bulbs sold for more than ten times the annual income of a skilled craftsworker. The prices dramatically collapsed in February 1637.  Tulip bubble is generally considered the first recorded speculative bubble and the term "tulip mania" is now often used metaphorically to refer to any large economic bubble when asset prices deviate from intrinsic values.