On what is now the 400 year (approximately) anniversary of the Tulip Mania in what was called the Dutch Republic at the time; it is interesting to speculate what historians will say about the Bitcoin Bubble (gotta get a better name than that) in another 400 years. Maybe something like .....
Four hundred years ago a very interesting, first of its kind, financial bubble was building , with most countries participating to at least some degree. What made it unique was that unlike previous financial bubbles , of which there were countless many over the many years that capitalism held sway, was that all previous ones were bubbles in the value of something. Be it tulips, not the first bubble by any means but maybe the most famous, or stock prices like in 1929 America, the South Sea Bubble of 1720 in London, the great Tech Bubble of 1999 mostly in America again, and the Housing Bubble of 2008 focused in America but also many other countries. The bubble of the early 2020's was a bubble of nothing. This nothing was called a 'coin' but had none of the characteristics of money; to all intents and purposes had no utility, was expensive and slow to trade as well as requiring a great deal of electricity ; and the world became delighted with it. Similar , no doubt, to the great love the Dutch had for tulips for a time; but this love was for nothing that existed. It was a pure love, a love for an artificial construct, a something that didn't exist so could represent anything you wanted it to.
Now the proponents of this coin argued that it would replace the money that was used at that time, with the dominant currency being the American dollar at that time, but the only value the coin had was the value it held in those dollars. On it's own it was literally nothing. No country backed up the value, there weren't tons of gold held in vaults as back up value, there was nothing. The only thing the coin had was price, given to it by the dominate currency. I guess one coin could buy another coin, but that was about it. It is true that a few gangsters and tax evaders used the coin to transfer dollars, and were willing to suffer the great cost of doing that for anonymity, but it made no sense for anyone else. When the financial firms of the day started letting you trade what was called paper coins , which made trading possible for the masses, the price of the 'coins' sky rocketed. Stuff had always been traded as paper, even tulips , but now people were paper trading basically a number. That made it unique because its intrinsic value was zero unlike other bubble things like gold for example which has always had some value for its utility, appearance etc. ; even tulips and especially as they were originally very new and exciting flowers in Dutch Republic at the start of the Mania. And of course housing, and stocks do have some underlying value. In essence people were paper trading something that didn't even have paper value.
Originally this was called the 'Bitcoin Bubble" but then a guy on an obscure forum in 2021 came up with the name 'Bitcoin Craze' , and then 'Coin Craze' , and as those things go , that name stuck.
In the Tulip Mania an interesting thing happened to help drive the mania , and that was a guy in the business of making carriages became an early backer of tulips. Shortly after he had bought a large number of bags of the newest tulips , he announced that he would start selling his carriages for tulips. At this time tulips were already very valuable, so a nice carriage could be had for 17 tulips. Later it turned out that it was all a ruse by the carriage maker. Seems his carriage making wasn't giving him any profit, and there were some serious questions about quality and safety in his newest factory, combined with the much larger carriage makers deciding to build the same style of carriage he had been making, but better and cheaper; well, the writing was on the wall. A very big distraction was needed. Tulips, being in a full throated mania, were perfect for that. And the tulip mania kept his business going a little longer, time for him to extract more money from it personally.
The Bitcoin Craze lasted until October of 2021. . As bubbles go , they pick up speed, and that certainly happened with Bitcoin. Just before the crash one 'coin' had a nominal , and I am hesitant to say value or worth, so let's say number of one million , of the dollars that were used at that time. And with a million of those dollars you could buy a pretty decent house at that time. With that million dollar number for one coin it made all the coins in existence, (and interesting there was a limit on the number that could be created, creating an artificial scarcity)'worth' a very large twenty trillion dollars. That was big money at that time. But as it goes with bubbles or Ponzi's , whatever name you use, eventually there was no more money left to be put into it. People were selling their house to buy 'coins'. It was rumoured that fathers were selling their daughters, but since that was outlawed most places by then, apparently it wasn't that widespread . So if it was a bubble it burst, if it was a Ponzi it deflated very rapidly. That is what always happened in those days to those things when all the money had been sucked into them, and there was no more available.
But it was also interesting that when the thing dramatically exploded, or just dropped into a heap of nothing, depending on your perspective, the effect wasn't that big. Many people went from being poor to being fabulously wealthy and then back to poor. again. Some of those who put their life savings in didn't fare too well, and there were some suicides reported. Unlike in the previous housing bubble of 2008, there wasn't all the suffering of people losing their houses, and I suppose there weren't the great heaps of tulips needing to be disposed of like after the Tulip Mania went to it's obvious and inevitable conclusion. The people who made money were the ones who got out before the top arrived. Just like in Tulip Mania, where our carriage maker was very prescient at picking the top, and saving his business for awhile longer with the profits from that; so too with the 'Coin Craze' some did profit from the dreams of the poor for quick riches.
The effect on the capitalist system which was the system in use at that time was fairly small. The reckoning that that system was soon to have, wouldn't happen until a few years later. But that's a story for another day.
Finally there is one more interesting side to explore. Once the 'coin' was still nothing but no one was willing to give even a plug nickle for a coin , which was a close as you could get to nothing at that time, the question was where did all the money go? In lots of bubbles money goes to those who buy early and sell early enough , from those who do the opposite. The amount made equals the amount lost. But with these 'coins' , they all were created from burning large amounts of electricity. So maybe they weren't nothing, maybe they were electricity. Once they were 'created' they could be sold for the cash of the day. One's born everyday, and in those days many many had been born over the years before. This is where it gets real interesting, it seems no one ever knew who had originated the idea of this coin or designed and implemented it. But after awhile the idea or rumour started that it was the leader of an obscure country called North Korea. It became obvious eventually that even though he cultivated a look of a Tinpot Dictator, he was in fact a master strategist. And he had his most brilliant computer scientists and the best social scientists create a believable system. A system that fooled everyone.
He had an abiding fear of the dominant military power of the day. He got that from his father and grandfather who had experienced their country being invaded shortly after what was called the 2nd world war. In that world war the dominant military power had used weapons of unimaginable destruction. They didn't use them when they invaded our dear leaders country, a scant 5 years later,but they didn't have any reason to. All the towns and cities were flattened in more normal ways, and 25% of the people killed mostly by the very conventional shot through the head. So our leader , with his fear very much intact, and reinforced by the actions of the dominant military power in many more countries that it later invaded; did what any good leader would do: try and find some protection for his country. And the best way he thought to do that since his country could never come close to rivalling the dominant country militarily, was to get one of those imaginably destructive weapons. Takes a lot of money to do that. Initially he sold his 'coins' for a few dollars. He had people on contract in China and other places where the electricity was cheap and abundant ,to 'make' 'coins'. But after a few years the price he got was huge. He had a keen understanding of the kind of people that lived in the dominant country, and their need for quick fixes, easy riches etc. It isn't known just how much money our dear leader made in this way, but reportedly it was huge. Enough to build those unimaginably destructive weapons, and build credible ways of dropping them on the dominant military's cities. And his country was never invaded again.
