Ever hear of tulip futures?
It was all the rage back in the 17th century.
Back in that time, the Dutch were considered the Wall Street crowd of Europe. Their business and financial systems were second to none.
Back then, the Dutch had a thing about tulips. They considered tulips to be a sign of success. Sort of like how rich people today view buying cars, real estate, and private jets to be signs of success. Back then it was having tulips, and, the more you had, the better off you seemed to be.
So tulips were in constant demand, but the problem was that the tulips were not in constant supply. They’re flowers. They can only grow during a certain season. So someone decided to pay tulip gardeners for the tulips that were not grown yet. Say you wanted fifty tulips, but they were not in season. What you did was make a deal with a gardener – or his representative thereof – for those fifty tulips when they were ready. They were already bought and paid for, so all that you needed to do was to wait for the gardener to deliver said tulips when they were ready.
And, because the law of supply-and-demand raised the price of tulips, if you bought yours, say, in January, and the price goes higher in March, it didn’t matter because you already purchased your tulips at the lower price. Even better, you could also sell your promised tulips at that higher price to someone else, which meant that you had more money to buy more tulips later on.
This was the one of first “futures” markets, and it was also the first speculative bubble in history.
All for an IOU over a flower.
The “bubble” started in 1634 and it became the fourth-leading export for the Dutch next to gin, herring, and cheese. Many a fortune was created because of tulip futures.
Then, in 1637, it all came crashing down. Buyers failed to show up at an auction and that caused people to panic. The price of those futures collapsed. You can thank a little thing called the bubonic plague for that. All of those “futures” in the flower went bust.
You’d think that we’d learn something from that... but stupid is as stupid does, and we’ve been doing stupid for centuries.
Remember the housing bubble from over a decade ago? We didn’t learn a damn thing back then, did we? Nope. We’re back in that again now.
Remember beanie babies? They used to be the thing. Bigger than baseball cards. Bigger than coins. People sold them like the Dutch used to sell tulip futures, especially through websites like eBay. But then... they stopped. Mostly because the market was oversaturated and also because of plenty of fake beanie babies. There are still beanie babies to be bought, they never went away, but the hype and the hysteria over them died with the 1990’s. People aren’t buying them to make money now. They’re buying them because they’re cute.
Well.. here we go again...
First, we have “digital currency”. It started with Bitcoin, but now we’ve got all sorts of new “coin” being manufactured and hyped and sold to the stupid and the gullible. Come up with a word, affix “coin” to the end of it, and hype it through so-called “influencers” and get stupid people to code in with digital “blockchains” to supposedly make your “coin” worth more. Supposedly.
The problem is this: Bitcoin and all these other “coins” are only valuable on computers.
If you have a $20 dollar bill, that paper bill has value based on the wealth of the U.S. Treasury. That is what the dollar is. It is a note of value backed by the government’s wealth. Even the “credit” on your credit card or debit card is based on the physical dollars in a bank, either yours or those of a lending institution.
What is digital currency backed by? Nothing physical. Not gold. Not silver. Not platinum. It’s backed by a bunch of 1’s and 0’s on servers. Its value is measured by digital exchanges and blockchains.
It’s no different than the digital currency used in MMORPGs like Worlds of Warcraft and Champions Online. It’s money that has no value outside of that respective medium. You pay to get in, you have to work to get it, and you can only spend on stuff through that medium.
I can take my $20 bill and go to McDonald’s and get lunch. Or I can go to the gas station and spend that money on gas for my vehicle. But I can’t take $20 of digital “coin” that I would supposedly spend countless hours coding blockchain for to McDonald’s or to the gas station unless they decide to recognize it as currency. It’s not universally accepted like physical currency. And, even if one business recognizes one kind of “coin”, that doesn’t mean that it’s the kind that you’ve invested in.
Think about that. You can spend countless hours sitting in a Starbucks, coming up with a supposed small fortune in blockchains using their free Wi-Fi service, and yet you still have to pay actual currency to get your $7 coffee to stay there so you can use that Wi-Fi and their electricity.
Then there is the fact that there are so many different forms of “coin” that are being created and exchanged that also really have no physical value to them, that only have value online, on servers that could crash at any time for any reason or could be shut down by hackers and malware or even a power outage. A hacker can use malware to take your “coin” digitally and there would be no way you could get it back. Currency stolen from a bank is federally insured to a certain level. Not so with a digital account of digital currency that cannot be traced.
The other little game going on involves “Non-Fungible Tokens” or NFTs. Basically, you take anything... anything at all... and attach some blockchain to it. A JPG image. A YouTube video. Some doddle that your toddler came up with on a tablet. The minute you attach a blockchain to it, it supposedly has value. Online, that is.
Selling NFTs are also all the rage now. Playboy went from showcasing beautiful women to hawking NFTs. Even Warner Brothers got involved with them during their 2021 DC FanDome virtual convention. Models, “influencers”, professional athletes, even actors are now hyping NFTs.
But, just like all those “coin”, NFTs only have value online. Their “worth” is only in the blockchain. They’re like the beanie babies of the 90’s.
Let’s get brutally honest here... the “crypto” craze is really much about digital nothings. Digital currency based on data bits instead of hard commodities, and digital commodities that only have value online outside of sentimentality.
It’s sort of like the man who was a millionaire only in stock options. That value was only worth a million if those options were cashed in that day. But then, the market crashes, or the business folds, and all that same stock is only worth a few dollars if that. Like a Dutch businessman in the 1600’s who owned a fortune in tulip futures only to go broke in just a few months before a single tulip could be picked.
It’s one thing to get a digital copy of a rare comic book or a clip of an old YouTube video for sentimental value. But to get into that kind of collections just to make money is really engaging in folly, just like beanie babies, or Cabbage Patch Kids, or baseball cards, or rare coins. You’re not going to get rich off them.
Speculative value is just that, speculative. Even in cyberspace, where digital fantasies are still just fantasies.
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