Did you know that a simple flower could crash markets? Yes, the demand for tulip flowers skyrocketed in the mid 17th century. Dutch tulip market bubble commonly known as tulipmania was one of the initial financial bubbles which induced merchants to purchase large quantities of tulips thus inflating the prices for them and the value exceeding the cost of a few houses and income levels. During this bubble occurrence, people make irrational decisions and inflate the prices of commodities more than their appropriate value and create hype around it. The higher the price quoted for a rare tulip, the greater was the exchange for them. Later, when tulip prices collapsed, the tulip owners and holders went bankrupt. The tulip owners realized in their decisions that their holding was a mere tulip instead of their earlier possessions like property. Tulips in today’s scenario can be related to certain stocks and cryptos. One such stock is Yes Bank which was listed in 2005 went to an all-time high of Rs. 400 and due to unforeseen circumstances such as extreme loan lending to institutions without due diligence faced severe liquidity crunch. Later, they issued an FPO of nearly Rs. 15000 Crores in July 2020. Currently, this stock trades at Rs. 12-13 approximately. Can cryptos be compared to tulips? There has been a lot of buzz around various cryptos such as Dogecoin, Shiba Inu, Bitcoin, and more. Certain comments from famous personalities such as Elon Musk can hype the prices of cryptos and drop them at a whim. These cryptocurrencies are highly volatile and can disrupt markets and investments. Tulips and cryptocurrencies do have few characteristics: How to avoid another tulip bubble? Thank you.
Really well explained. Cryptocurrencies could certainly really be the next tulip
ReplyDeleteVery well explained 👏
ReplyDeleteThank you for introducing this topic and sharing detailed thoughts
ReplyDeleteExplained the topic in such clear and concise manner!! Kudos!
ReplyDeleteVery well explained concept
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