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.”
Tulips are also grown in the states, though. The biggest American grower of tulips is Sun Valley Floral Farms, based in California. Bill Prescott, a spokesman for the farms, said that unlike Dutch tulips, which are grown hydroponically, most American tulips tend to be grown in soil.
The price of tulips, Prescott said, also varied strongly by their color. Orange tulips go for a high price before Thanksgiving, for example, but then immediately lose value come Black Friday, when red and white tulips become the hot item. (Which, in turn, lose value after Valentine’s Day, when springy pastels take over.)
Prescott said this posed a real problem for growers. “We’ve been in the position where we have too many orange tulips come December,” he told me. What happens then?
“You either sell it to a bouquet maker who can put it in a holiday bouquet and hide the fact that they’re orange tulips,” Prescott said, or “Trader Joe’s has a sale on orange tulips.”
And, for all this folly, it doesn’t look like there’s a way to buy tulips with bitcoin right now. In an email to me, Tim Maly, a Canadian writer and researcher who first proposed the tulip-bitcoin exchange rate, said that there was no easy way to convert bitcoins to tulips.
“There are some hints of bitcoin florists but they seem to have never taken off or become scams,” he wrote. “There was talk of it on Reddit too but nothing came of the threads I found.”
It looks like the best way to buy tulips is buying a gift card for 1-800-Flowers.com from Gyft, an online gift card company that accepts bitcoin, and buying tulips from that florist. It’s “clearly an inefficient system,” writes Maly, “as the [bitcoin] have to be converted to cash-equivalent and then bought retail.”
And even worse than that, you have very limited ability to pick your tulip varietal via 1-800-flowers. A big part of what drove the tulip mania was the various specialized breeds and varieties. There is no opportunity to invest in those mechanisms given the current system.
Alas, it looks like it may be best for flower investors to stick to a government-controlled currency. Callahan, the Maryland florist, knew all about bitcoin—his son had written a college paper on the topic—and I asked him if he would accept the digital currency in return for tulips.
“Well, right now,” he said, “no.”
Thanks to Tim Maly, who conceived the bitcoin-tulip exchange rate, and Max Fenton, who first thought of putting it in a graph. The live exchange rate counter and the charts were made by Atlantic web developer Frankie Dintino.