Tulip Mania vs. Bitcoin: History of Financial Bubbles & Crypto Risks | Anatoly Klepov

Financial bubbles of tulips and bitcoins

Anatoly Klepov

In 1637 for one flower of a tulip it was possible to buy a house in Amsterdam. Like now for one bitcoin an apartment in Moscow.

 

Merchants traded them, like gold.

 

People sold houses to buy one flower (which will wilt in 2 weeks)

 

On one winter day the entire market collapsed. How it will be with bitcoin after some time.

 

Here is the insane history of tulip mania, the first financial bubble. And no less insane [one] of bitcoin.

 

In the beginning of the 1600s the Netherlands were the richest country on Earth.

 

• Built the first modern stock exchange
• Its merchant fleet ruled world trade.
• Amsterdam became the financial capital of Europe

 

And in this golden age a strange passion bloomed: tulips.

 

Tulips, imported from the Ottoman Empire, were an exotic, rare, and deeply symbolic plant.

 

But one thing made them golden:

 

Color breaking.

 

The mosaic virus caused unpredictable stripes, creating “flames” of colors unseen before.

 

The rarer the pattern, the higher the price.

 

At first, tulips were a luxury for botanists and aristocrats.

 

But around 1634 merchants saw something different:

 

A market.

 

• Prices grew weekly
• Bulbs are sold before they have bloomed.
• Forward contracts exploded

 

People were not buying flowers, they were buying dreams of super profit.

 

The most legendary tulip?

 

Semper Augustus.

White petals. Crimson flame.

An extremely rare occurrence.

 

In 1637 one bulb was sold for 5500 guilders more expensive than a house on a canal in Amsterdam cost.

 

Imagine that today you pay 1 million dollars for one flower. Also like now $120,000 for one bitcoin, created by a computer.

 

By 1636 tulips became an item of trade on the tables of Dutch taverns, like stock options.

 

Buyers made a small initial payment to lock in future prices.

 

It was not about gardening.

It was windhandel — “trading the wind”.

Speculation on bulbs that no one touched, that no one planted or planned to keep.

 

Then came February of 1637.

 

In Haarlem another tulip auction took place.

 

But something was different:

Buyers did not show up.

 

Panic spread.

 

By the end of the week:

 

• The price of bulbs worth 1000 guilders fell to 100
• Contracts became worthless
• Speculators were ruined

 

The bubble burst. In one night.

 

Contrary to the myth, the Dutch economy did not collapse.

But the reputation changed.

 

The government refused to enforce unpaid contracts.

 

Local courts were flooded with lawsuits.

 

And the Dutch elite, once obsessed with tulips, turned this mania into a cautionary tale.

 

Moralists compared it to sin.

Artists mocked it.

Historians mythologized it.

 

So what actually caused the financial crash?

 

Behind every bubble stand the same forces:

 

• Speculation detached from value
• Credit leverage through contracts
• Mass psychology
• Fear of missing out on super profit
• Sudden loss of confidence

 

Tulip mania was not about tulips.

It was about belief and how quickly it dies.

 

Why this is still important today

 

In every modern bubble there are echoes of 1637:

 

• Dot-coms in 2000
• Low-rated mortgages in 2008
• NFTs and meme-coins in 2021

 

Assets change.

And psychology — does not.

 

“The tulip is a flower that bloomed in all ages of excess.”

 

What tulip mania teaches us:

 

• Status symbols distort rational markets
• Liquidity makes hype seem like value
• Confidence is the real currency of speculation.
• Greed and fear are timeless.
• Every bubble begins with someone simply wanting to create something beautiful.

 

When it comes to bitcoin – a modern crypto currency, then I remind people that the foundation of cryptography is a random number! About this wonderfully said A. S. Pushkin: “O how many wonderful discoveries for us

The spirit of enlightenment prepares

And experience, the son of difficult mistakes,

And genius, friend of paradoxes,

And chance, god the inventor.”

 

Chance is God. A random number. A. Pushkin worked closely with his closest friend Pavel Schilling- the head of the cipher (cryptographic department of the Russian Foreign Ministry) on deciphering ciphergrams. As a linguist of the French language. In those times many European Foreign Ministries including the Russian one used the French language for correspondence. And the decryption of government dispatches was possible because the encryption keys were not random numbers. Therefore A. Pushkin wrote, that a random number is God!

It is known that bitcoin is obtained by numerous calculations on computers of a specific mathematical formula. And again numbers must be random. But can they be created by a mathematical method? The famous mathematician Von Neumann answered this question: “Any one who considers arithmetical methods of producing random digits is, of course, in a state of sin.” Von Neumann, John (1951). “Various techniques used in connection with random digits”. Applied Mathematics Series. National Bureau of Standards. 12 : 36–38 .

 

This is the answer of one of the founders of computers in the world to the question of whether it is possible to decrypt or counterfeit bitcoin and a multitude of various software messengers and the existing world financial system.

 

Edward Teller later recalled: “Von Neumann spoke with complete confidence.

 

‘The approaching singularity will change everything. We will not understand the new world. It frightens me more than nuclear bombs.’

 

‘Because we won’t be able to go back.'”

 

Cancer took von Neumann in 1957.

 

His last prediction was strictly classified. Too alarming for America of the Cold War times and political confrontation with the USSR. But the meaning of this prediction was nevertheless learned by one of the intelligence agencies and it was that AI would turn people into information slaves, who would forget to dream about Freedom and would be Happy with what is given to them.

 

Just like now when they acquire bitcoins, which have not a random, but a pseudo-random sequence. Therefore the question of counterfeiting bitcoin is a question of time and depends on the computing speed of quantum computers, AI, and specialized crypto computers. Therefore the US President D. Trump invests trillions of dollars in the development of super chips for AI. And Musk is building a data center AI called Colossus, just like in his time Alan Turing built his Colossus for decrypting the German cipher machine “Enigma”.

 

© Anatoly Klepov, 2025