Imagine paying more than six times the annual average salary for a tulip bulb.Houses, carriages and businesses were less expensive than these exotic items in the Dutch tulip market bubble of the 17th century.Some estimates are that in today’s…To access this article in full please login or register today To access this article in full please login or register today
Imagine paying more than six times the annual average salary for a tulip bulb.Houses, carriages and businesses were less expensive than these exotic items in the Dutch tulip market bubble of the 17th century.Some estimates are that in today’s money the most expensive bulbs sold for more than US$750,000! As nonsensical as it sounds, the craze for the bulbs saw people from all walks of life cashing in, until the market collapsed, and hundreds of “investors” were left holding an empty flowerpot.
Tulips were introduced to Holland in the 16th century and were a prized item for the wealthy.As cultivation of the bulbs grew, so did the demand.
Soon the financial market got involved and futures contracts and leveraged purchases of bulbs became commonplace.The stock market was deeply entrenched in the ensuing mania that gripped the whole country.Borrowing money to buy a commodity that was in limited supply and whose price was only going up and up seemed like a no-brainer, as speculators displayed their newfound wealth.
Then one day tulip bulbs went unsold at an auction.
This caused jitters in the marketplace.Soon panicked investors were offloading their supplies at rapidly plunging market rates.Suddenly borrowing money to buy bulbs was no longer sensible, as the loan principals left many speculators further and further under water.It was the world’s first market bubble popping.There would be many more to come.
Many analysts believe we are living through the biggest bubble in a generation.
With cheap money available worldwide and superheated bullish markets, any pullback is just a signal to buy the dip.
This is no longer about Mortgage-Backed Securities and Credit Default Swaps, there are multiple SPACs, cryptocurrencies and of late, non-fungible tokens (NFTs) to invest in.Many millionaires have been minted out of crypto trading and even more have lost a tidy sum during the wild swings.BITCOIN
I first heard about Bitcoin around 2009 when it was trading for 80 something dollars.A friend of mine told me he wanted to invest, and I should too.
I successfully argued that it was a fad and would go nowhere.He later showed me the valuation at US$500 and likewise I showed him when it fell back to less than US$100.Oh, had I argued less successfully! Bitcoin peaked at US$70,000 recently.Headlines Delivered to Your Inbox Sign up for The Gleaner’s morning and evening newsletters.
Whereas a finite number of Bitcoin and other cryptocurrencies can be mined, the true value lies in demand.Which crypto will people buy into when the types are unlimited.
We already see wild swings in traditional and meme coins such as Dogecoin based on simply tweets.Whereas the concept is a good one, not all coins will make it to the mainstream the way only some dotcom companies survived the bubble of the late nineties.
Although I missed out on being a bitcoin millionaire, and OLINT for that matter, (heard about it first in 2006), I am still sceptical of the NFT craze.NFTs are assets that make use of blockchain technology to secure ownership and have unique identification codes and metadata.Each NFT is unique and is the digital equivalent of owning an asset such as artwork or real estate.The value intrinsic to the NFT is the satisfaction in knowing that you have the bragging rights to owning it.Videos and pictures on the web can be shared and screenshotted but they lack the unique identifiers and blockchain validation of owning the NFT.Anyone can enjoy the NFT, but they can’t have the satisfaction of saying they own it.
DIGITAL ARTISTS
For digital artists this is finally a way to secure their copyright as it is easy to download digital art without royalties.Artists such as Beeple, who sold the most expensive NFT at US$69.3 million, can create real artwork and benefit from this non-centralised distribution medium that connects artists and buyers directly without dealers.This appreciation of art I can understand, but when the Nyan cat NFT sold for almost US$600,000, I started to wonder if this is a non-fungible tulip bubble.
The truth is most of the leaps in technology have been laughed off as absurd.The internet was supposed to be maxed out from the nineties.
I remember Steve Balmer of Microsoft scoffing at the fact that the iPhone didn’t have a keyboard.I brushed aside Bitcoin, the first attempt of taking blockchain technology to the masses.Now in addition to fungible cryptocurrencies jockeying for longevity, the blockchain has spawned NFTs.The direction generally seems to be towards the decentralisation of the internet through blockchain technology.How it will impact our lives in the long run is still unclear.
Crypto currencies are still not widespread in the mainstream marketplace and it takes about 20 minutes to perform a transaction.It is inferior in ease of use compared to central bank printed money.
What crypto and NFTs represent is the evolution of the internet and the way we do business.If tangible assets can be tokenised and their ownership verified and transferred without bureaucratic red tape, it may revolutionise purchasing.Imagine buying a house without talking to a lawyer and the record is no longer put on a title but is embedded in the blockchain.
Even if the NFT bubble bursts, there are opportunities out there for the discerning investor who is cognisant of trends.
And the future of the internet lies in blockchain technology.If anyone sees it fit to guide my foray into this world of investing, I will pay you handsomely with digital pictures of my dog.
– Dr Alfred Dawes is a fellow of the American College of Surgeons, CEO of Windsor Wellness Centre, and medical spokesman for Lifespan Spring Water.Follow him on Twitter @dr_aldawes.
Send feedback to and ..
