To equate Bitcoin to tulips, or to dotcoms in general, is something that can be expected from those who don’t have the basic tools to understand neither the free market structure, and therefore economic science, nor Bitcoin.
These comparisons are equivalent to the following by Paul Krugman, Nobel Prize winner for the economy: “By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s “. A few years from now we will regard Bitcoin/tulips comparisons as we regard today Krugman’s words: nonsense.
The increase of tulip prices was an expression of a passing enthusiasm and for something that in no way improved the structure of the economy. The long-term result was a return to the pre-excitement level of all the tulip prices, no one excluded.
The increase of dotcom stock prices was an expression of enthusiasm for something that profoundly improved the structure of the economy. Businesses that improved this structure more efficiently (i.e. Amazon) would have seen in the long run a price increase definitely higher than that in late ’90s. The other dotcom businesses, those who thought it was enough to have a label to change the structure of the economy, failed, and rightly so.
The increase of Bitcoin price is an expression of enthusiasm for the return of commodity-money 2.0: non-censurable, decentralized, not arbitrarily inflatable, not controllable by central authorities. To understand the systemic structural importance of the return of commodity-money, it is necessary to study the Austrian School of Economics. But to grasp why this is important, it is enough to observe the behaviors of governments and central banks around the world in relation to Bitcoin. If the price of something is destined to go to zero, why bother? Why bother to regulate, forbid, tax, control, spy on that thing?
To grasp the answer, just reflect on the fact that if tomorrow no one will be forced to use government money, the purchasing power of the latter (and with it the extortion capacity of the state apparatus itself) would quickly fall; while the purchasing power of commodity-money, based on free individual choices and not on constraint (i.e. on real, non-artificial basis), would have no reason to decrease. Quite the contrary.
Those who cares about the “Bitcoin bubble” should therefore worry primarily about the purchasing power of the US dollar, or the euro, and, secondly, the financial prices determined by its purchasing power and the artificially low interest rates imposed by those who have the monopoly on fiat money. In other words, those who worry about a “Bitcoin bubble” today should be concerned with structural bubbles: those created by the monopoly on fiat money.
If Bitcoin as an experiment were to succeed, it would become the pin that will pop those bubbles inflated by fiat money (or rather, it would accelerate their explosion: from economic science we know in advance and with absolute certainty that those bubbles would pop anyway, as it has always happened). But Bitcoin is more: it’s an individual way out of those bubbles. Forget about tulips.
A few years from now, a person may find out that he/she was part of the ‘flock’ because he/she took the mainstream economic articles seriously while he did not take Bitcoin seriously.
