What's up guys and welcome to wall street millennial on this channel, we cover all things related to stocks and investing today we're going back in the history books to look at one of the greatest financial bubbles in investing history. This bubble didn't involve stocks, bonds or any financial assets. We're talking about the dutch chula bulmania of 1637. The dutch tool of gold mania saw the price of tulips increase in value roughly tenfold over the course of just a few months.

A few people made the equivalent of millions of dollars speculating on these flowers, but most people ended up holding the bag full of worthless flowers. The price of tulips 350 years ago may not seem relevant to investing today, but human psychology is very sticky. As the great mark twain says, history doesn't repeat itself, but it does rhyme the same basic psychology behind the toolable mania pushed text talks to unsustainable levels in the late 1990s. It also pushed up home prices to absurd levels, leading up to the 2008 housing crash by understanding what drove tulip prices in 1637.

We can better understand speculative asset price bubbles in the future. In the 17th century, the netherlands was considered among the most advanced and prosperous countries on the planet. They were well ahead of their time having a sophisticated financial system, including the world's first stock market. This allowed them to finance large enterprises, such as the dutch east, india company, the dutch merchant industry, was extremely lucrative.

One successful voyage could yield profits in excess of 400 percent. The booming economy created a tremendous amount of wealth for dutch merchants to showcase their wealth. Rich families would spend heavily on clothes and other status symbols, including exotic flowers. Tulips are not native to europe and were originally imported from the ottoman empire in the 16th century.

Tulips had a much more intense petal colour than native european flowers. In addition, their status as a foreign species made them highly coveted as an exotic item. Tulips were sold and traded in local dutch markets over time. The tulip market became more and more sophisticated tulip growers.

Cross-Pollinated, the flowers to grow new varieties, the more exotic the color scheme, the more valuable the tulip would be. Many tulip growers made a name for themselves by growing expensive tulips and became well respected in their communities. Cultivating tulips takes a long time. The tulip develops into an onion-like bowl that is dormant for multiple years before blooming.

Just a couple weeks. People would trade the tulip bulbs while they are still dormant or sign contracts to buy the tulip at the end of the season. These are analogous to futures contracts. In 1634, the price of tulips started to increase, as dutch traders started exporting the flowers to france.

When people started to see prices rise, they got fomo and wanted to get in on the action as the speculation increased people started, buying and selling tulips with futures contracts. Never even seeing the bulbs in person, informal tulip exchanges started popping up in taverns all over the country. People would go to the taverns and start training tool contracts with each other. After having a few drinks in 1637, the tulip mania reached its peak even regular tulips.

Without any exotic, colors were selling for hundreds of gilders, some futures contracts were being traded 10 times a day. The tulip investors were the equivalent of modern day traders in november of 1636. Tulips were trading for less than 10 gilders per bulb as a speculation. Increase prices were bid up all the way over 200 guilders in february of 1637, which represented a 20-fold increase.

The market proceeded to crash roughly 99 by may of that same year. The reason that tulips were destined to crash is because the price was not justified by the fundamentals at the peak. Nobody was buying a tulip for 200 gilders because they like the way it will look in their garden. The only reason that anyone was buying them was because they thought they could sell it for even higher prices.

In a couple days, time at the taverns people would hear stories from their friends who doubled their money overnight, playing tulip contracts. This created fomo in the same way as gameport on wall street bets. The surge in price happened during the winter when there was no new supply coming onto the market until the next season. The supply was fixed in the short run, so as hype started to build and demand increased prices, skyrocketed, seeing prices soar caused even more fomo and it became a vicious cycle of the price going up and hype increasing the tulip bulb mania has been liking by many Market commentators to certain aspects of the current markets, perhaps most compelling of these comparisons, is to today's crypto markets.

Bitcoin has had an insane run up in the past half year, one that some people say is inherently unsustainable. Let's take a look at what some of the biggest bulls and the biggest bears have to say about bitcoin and other cryptocurrencies. One of the biggest bitcoin bulls of recent months is michael saylor. Ceo of microstrategies microstrategies is a business intelligence.

Software company that makes things such as smart desks, office, space, sensors and other office space trinkets, it's safe to say that has nothing to do with bitcoin and yet michael saylor decides to put most of the company's net assets into bitcoin as an investment. Now the company's stock trades in line with the price of bitcoin, which makes sense because the day-to-day fluctuations in the company's value should largely be determined by its large position in the volatile asset. Good question michael - and this is a simple straightforward: are you a software company or are you a bitcoin fund? Our p l is a software company and we sell the world's best enterprise business intelligence, software. Okay, our balance sheet is no longer invested in dollars.

Our balance sheet is invested in btc because we believe that's the best treasury reserve asset we could choose in the world, got it, but michael saylor isn't. The only person who thinks bitcoin is a good bet. Tom lee, a former managing director at jp morgan and managing partner at fundstrat, is also big on bitcoin. He thinks that 2021 will see bitcoin rise.

Another 300 percent wish you you put out a higher number at this point: how much bitcoin's risen in such a short amount of time yeah. You know uh yeah, that number it actually came from david greiter who's, our digital asset strategies, but uh. I think in rounder numbers you know, 2021 is going to be a lot like 2017 um, which means bitcoin should do even better in 2021 than it did in 2020, so something above 300. A more than 300 percent return on.

Bitcoin is what you're forecasting. After years of seemingly never ending upside surprises by bitcoin bears are justified in sounding the alarm over the optimistic valuations whenever people start predicting huge future games just based on outside's recent performance without offering any other explanation, besides stocks only go up, that's a sign that there Might be too much exuberance, but when these assets continue going up, even after that the og bulls come up with ways to justify their bullishness. No saying about bitcoin is bitcoin. Is a bank in cyberspace for people that don't have the ability to run their own hedge fund? It's not a stock, it's an asset class, and so you know, if i put a billion dollars into a bank and then i came back a year later and i put another 10 billion dollars in the bank.

The bank is not overvalued by a factor of 10.. The bank is just 10 times bigger people are using bitcoin to store their monetary energy for the long term, and so the price is a reflection of the monetary energy in this bank and cyberspace. He brings up a good point that bitcoin will continue to enjoy tailwinds. As it becomes more and more widely accepted, when banks credit cards and mainstream companies start using bitcoin at a large scale, it will create more demand for the scara's asset supporting valuations.

But at the same time, when that happens, what's the fair price of bitcoin, there has to be some fair price and at sixty thousand dollars a coin. How do we know if it's massively undervalued, massively overvalued or priced just right? It could very well be the case that the price is already too inflated, even given the tailwinds just because of people speculating on it like the tool involves, but where it's pretty. Obviously a bubble is in the altcoins. Just look at dogecoin.

It went from being kind of a joke to a 40 plus billion dollar market cap. It has experienced multiple surges in the past four months and doesn't seem to be at risk of giving up its gains based on the charts, but none of the bull thesis for bitcoin applies to dogecoin. There's really no possibility that dogecoin will be adopted as a mainstream. Digital currency, it's not used for any real financial infrastructure and doesn't even have the scarcity like bitcoin.

Does there's no fundamental reason for doge to be up this high people can have fun trading, bitcoin or other cryptocurrencies, or even think that bitcoin will be a good investment for the future, but no matter where, on the issue, you stand, there's no denying the similarities to The toolable mania in the early days, alright guys that wraps it up for this video, if you like, the content, make sure to smash the like button and subscribe for future uploads also make sure to check out our second channel wsm research, where we post dd on High growth stocks in the meantime, thank you so much for watching and we'll see in the next video wall street millennial signing out.