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Tulip mania

5 biggest economic bubbles in history

Economic bubbles occur when the price of an asset, such as stocks or real estate, is driven up artificially and becomes disconnected from its underlying value.

An economic bubble is a time of fast economic expansion that is driven by speculative enthusiasm and excessively high asset prices. A bubble is characterized by an increase in demand for an asset, such as commodities, stocks or real estate, which drives up its price. A number of factors, including easy access to credit, low interest rates and investor optimism, frequently combine to create financial bubbles.

The asset’s price rises as more individuals invest in it, luring even more capital. Its price eventually falls below a level that can be sustained, which causes a sell-off and a sharp collapse in value. This causes widespread losses for investors and can have a large negative impact on the overall economy.

Here are five significant economic bubbles in history.

Tulip mania (1634–1637)

A financial bubble called “tulip mania” affected the Netherlands in the early 1600s and was based on the price of tulip bulbs. At the time, tulips were a brand-new, exotic flower that was greatly admired for its beauty in Europe. Tulip prices increased along with the rise in demand, reaching previously unheard-of heights before abruptly plummeting.

Numerous investors, including affluent merchants and aristocrats, lost their fortunes when the tulip bubble burst, leaving them with worthless bulbs. Considered one of the earliest historical economic bubbles, the tulip mania is sometimes cited as a warning about the risks of speculation.

The South Sea bubble (1720)

A speculative bubble known as the South Sea bubble developed in England in the early 1700s and was based on the South Sea Company, which had been given a monopoly on trade with South America. The company’s stock swiftly increased in value, sparking a buying frenzy among speculators.

When the bubble burst in 1720, the value of the company’s stock fell precipitously. Many investors lost all of their money, and this resulted in widespread poverty and unemployment. The South Sea bubble had a big influence on the English economy and is regarded as one of the first financial crises in modern history.

The economic crisis also resulted in a decrease in consumer spending, undermining public confidence in the government and the financial system, leading to a general distrust of speculative investment that lasted for several decades.

Railroad mania (1845–1847)

The railroad craze, commonly referred to as the “railway mania” of the 1840s, was a time when the railway sector in Great Britain experienced significant growth. Railroad stock speculation, which saw a fast increase in value and sparked a speculative frenzy, was the primary driver of the bubble. When the bubble burst in 1847, the value of railroad stocks fell, resulting in significant financial losses for everyone.

The railroad mania resulted in severe financial losses for many investors, including affluent people and banks, who lost a lot of money. Because there was less demand for railway shares, there was less spending by consumers, which had a detrimental effect on the whole economy. In the years that followed, speculative investment declined as a result of the financial losses from the railroad mania, which also contributed to a general decline in stock market confidence.

Stock market crash (1929)

The Great Depression was ushered in by the stock market crash of 1929, a turning point in the development of the world economy. The depression was a prolonged worldwide economic downturn that had far-reaching and enduring effects on the global economy.

A speculative stock market bubble lasted for more than a decade and was inflated by a number of causes, including easy borrowing and optimism about the future, which contributed to the disaster.

The bubble burst on Oct. 29, 1929, sending the stock market into a tailspin and generating significant financial losses for everyone involved. The Dow Jones Industrial Average (DJIA) experienced a loss of nearly 25% of its value on that day, which is commonly referred to as “Black Tuesday.”

The DJIA lost nearly 89% of its overall value over the period of several months, from its high in September 1929 to its low point in July 1932. High unemployment, widespread poverty, bank failures and a decrease in crop prices were only a few of the far-reaching effects of the catastrophe.

Dot-com bubble (1995–2000)

The dot-com bubble was a financial bubble that took place in the late 1990s and early 2000s as a result of the internet’s explosive expansion and the dot-com enterprises — e.g. eBay, Google, Amazon, Yahoo and TheGlobe.com — that emerged during this time. Dot-com stock speculation, which saw a fast increase in value and subsequent speculative frenzy, was the primary driver of the bubble.

When the dot-com bubble burst in 2000, it resulted in massive financial losses and a decline in the value of dot-com stocks. The dot-com bubble had a tremendous effect on the world economy and played a big role in the early 2000s economic recession.

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Nifty News: NYT says NFTs in pandemic-fueled bubble, Polkamon eggs produce $1M gas …

NYT likens the NFT bubble to the plague induced “tulip mania” of the 1600s, Polkamon NFTs generate more than $1 million in gas fees, and a man fails to sell 50% of a house as an NFT

Having just flogged an NFT column for half a million dollars, the New York Times is now wondering if perhaps the whole scene is in a bit of a bubble?

In a March 30 article, Art’s NFT Question: Next Frontier in Trading, or a New Form of Tulip? author Scott Reyburn questioned the sustainability of the current NFT bubble in prices and drew comparisons with the Dutch “tulip mania” of the 1630s.

Tulip mania for anyone who doesn’t hodl flowers, was a bubble in the Netherlands that saw prices for a single tulip bulb rocket up to a high of 6,700 guilders in February 1637 — enough to purchase a house at the time.

The NYT suggested that perhaps history was rhyming, given the similarity between the COVID-19 adjacent NFT bubble and the bubonic plague-driven Tulip bubble:

“It should also be pointed out that febrile speculation in assets that have no physical existence has flourished during epidemics, when people spend a lot of time indoors. Tulip mania coincided with an outbreak of bubonic plague in the Netherlands that killed a fifth of Amsterdam’s population between 1635 and 1636.”

The response from financial authorities to the pandemic has, of course, also inflated asset prices across the board, so perhaps NFTs have also been a beneficiary of people having too much money and time on their hands.

The article concluded with an apt quote from 1637 Tulip mania satire, The Rise and Decline of Flora:

“It has been a madness.”

SuperRare raises $9 million

NFT marketplace SuperRare has has raised $9 million from its series A financing round.

The platform announced on March 31 that the round had been led by Velvet Sea Ventures and saw investment from popular figures such as Mark Cuban, Chamath Palihapitiya, and Ashton Kutcher. SuperRare noted:

“In just three years, the crypto art market has already grown to be a global phenomenon over $400M in size. This investment will allow SuperRare to accelerate growth, serving significantly more artists and collectors as digital collecting nears more mainstream adoption”

The platform intends to use the funding to expand “the core features of SuperRare into more scalable, social elements like chat and personalized feeds”. It also intends to improve market mechanics and auction functionality, extend “supported artwork formats further into VR and programmable media” and hopes to implement layer-two scaling.

Polkamon Eggs, the latest NFT craze

Decentralized exchange Polkastarter has joined the NFT mania with the launch of "Polkamon” animated digital monster collectibles.

Early adopters of the project were offered the chance to participate in the “claim your eggs contest”, which saw 125,000 users claim a tokenized egg that had a chance of being “hatched” or minted into a Polkamon NFT.

“In gas fees alone, we estimate Polkamon fans have spent more than $1 million claiming eggs for their chance to participate in our upcoming IDO on Polkastarter,” a blog post noted.

The project is now verified on OpenSea, and the highest sale at the time of writing is for a silver “Moonrock x Morningstar Babydragon” at 22 ETH, worth around $39,000.

Another OpenSea user appears confident in the project. After buying a “Polkastarter Babydragon” for 14.94 ETH, they currently have it listed for 54.99 ETH (worth roughly $100,000).

Second crack at NFT house sale

Property investor Ivan Malpica has sold a 50% share in a St Louis house that he put up for sale as an NFT on Mintable in early March.

You can buy half this home in St Louis via Mintable for less than 30 ETH

Unfortunately, he tells Cointelegraph he sold it offline to a "new partner who did not have crypto or ETH" and instead sold it for cash.

"I received a lot of interest in the first real estate NFT, but the new buyers wanted to partner traditionally," he says. "Since there was a lot of interest I decided to create a second NFT to try again on a new property." He has just listed a 50% share in another St Louis property as an NFT on Mintable for 29.7 ETH.

From NFL to NFT

Former NFL-star turned actor Veron Davis, has followed Rob Gronkowski and Partick Mahomes into tokenized collectibles with a drop on Rarible today.

Davis played in the NFL for 14 seasons and won the Super Bowl with the Denver Broncos in 2016. The drop consists of five open editions and a one of one which depict career highlights from Davis’ career including trophies, Super Bowl action shots, and even a tokenized “rookie season” action figure of the star.

The auction is due to close on April 4.

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