See that big number up there? It’s the current bitcoin-tulip exchange rate. Based off the weighted price of bitcoin from the currency exchange website Mt. Gox, and updated every 15 minutes, it calculates just how many tulips you could buy with one bitcoin.
As of publication, the number was in the 700s.
It’s a silly way of getting at a serious question: Is bitcoin a bubble? The digital currency has now been the subject of a giddy U.S. Senate hearing, a Federal Reserve economist’s advisory letter, and oodles of bemused press. Since briefly losing value when law enforcement shut down the online black market Silk Road in October, the currency’s value has almost unstoppably climbed. A single bitcoin—little more than $13 a year ago—now costs over $1000.
“All I can say is that the crash is going to be great,” proclaimed technology writer Adrian Chen in the New York Times last week. “Bitcoin is too dependent on speculative mania to be of practical use as a currency.”
Bitcoin's sudden rise has people thinking about the ludicrous heights that tulips achieved in the Netherlands in the 1630s. At the peak of that bubble, a single tulip bulb could cost more than ten times a craftsman’s annual salary. While some of these prices were “justified” by market forces—the rarest breeds were enviable luxury goods—the speculation bore common tulips aloft too, raising their price 26 times in January 1637 before, a week later, it fell to one-twentieth of the peak price.
“This is worse than the tulip mania,” a former Dutch central bank president said yesterday about bitcoin. “At least then you got a tulip [at the end], now you get nothing.”
What does speculation like that look in action? The Atlantic investigates. Here are some charts.
As of today, you can buy more than 700 tulips with one bitcoin. That’s a precipitous rise in value—at the beginning of October 2013, you couldn’t even buy 90 tulips with one bitcoin.
Look at that recent spike! Look at the growth just in 2013! It’s ridiculous.
Now: My methods aren’t scientific. In trying to calculate the price of a single tulip stem, I consulted a major floral online retailer, a local florist, and a tulip grower in California. They variously presented the price of a single flower at $1.66, $1.50, and $1.00. I’ve settled here, imprecisely, on the gloriously accurate median of $1.50/tulip.
Talking to those folks, I learned that the Dutch still dominate the modern-day political economy of tulips. Tracy Callahan, the president of Bethesda Florist in Bethesda, Maryland, estimated that 85 percent of tulips on the east coast—85 percent of those $1.50 tulips—are grown in Holland.
American florists work out bulk deals with brokers, he said, who themselves deal with growers whose families have sometimes been in the flower-growing business for centuries. After working out a deal, florists receive weekly or twice weekly shipments of tulips, each usually with 3,600 stems.
Because they’re sold privately in bulk, Callahan was reluctant to reveal the wholesale price of tulips, but said it was “significantly less than $1.50.”