On Friday, the world finally gets to see the long-awaited period film Tulip Fever. It sets a forbidden love story against one of the world's first speculation bubbles. For Dutch investors of the early 17th century, buyers were simply frantic for new and exotic varieties of bulb. Some made and lost fortunes on the flowers, until suddenly the bottom fell out of the market in February 1637.
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Given some distance, it's a classic socioeconomic behavioral model. Today, some analysts argue that we're seeing all the warning signs for a similar end to cryptocurrencies — in particular, Bitcoin. David Ader, chief macro strategist at Informa Financial Intelligence, told CNBC on Thursday that Bitcoin's stock performance over the past five years has almost precisely mirrors that of the Nasdaq Telecommunications Index just before the dot-com bubble burst in 2000. "This looks like an overly frothy market," Adler said, "and frothy markets lose their froth."
Bitcoin has always been a subversive way of doing capitalism. It's an open-source, decentralized, privacy-first means of financial peer-to-peer transaction, created by an individual or a group pseudonym, Satoshi Nakamoto. Estimates vary on how many people use "wallets" to buy and sell online. Earlier this year, Cambridge University estimated there are between 2.9 million and 5.8 million users of cryptocurrencies worldwide, most of those Bitcoin users. If we're near the peak of a Bitcoin bubble, it won't destabilize whole economies and sectors of society the way tulips did in Renaissance Holland.
Still, investors may have a reason to stay interested in Bitcoin. While the cryptocurrency in total represents a market value of $78 billion, the most interesting part of Bitcoin may be the technology that supports it. If the bottom drops out from under Bitcoin, the block-chain system could still find a place in the future of capital.