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What was the “Tulip” Bubble?

Markets have been around for much longer than most people think. The Tulip bubble happened in the 1500's!

In the last decade of the 1500’s, Tulips were brought to Holland from Constantinople by botanist Carolus Clusius. Within a few years, the Tulips began to spread through Holland like wildfire, becoming luxury goods. As demand rose to astronomical levels, prices skyrocketed along with it.

Eventually, people would gain and lose entire fortunes on the beautiful (but not that beautiful) plants. Of course, the actual value of the tulip bulbs was nowhere near the thousands of dollars (if the amounts were converted into today’s standards) that the traders paid for them. Eventually, people began to sell their invaluable tulip bulbs for real cash, and a domino effect ensued.

As supply rose sharply (everyone was trying to sell), demand fell (not enough buyers), along with the prices. People had traded their life’s savings for a piece of flora that was now worthless. Thus, the bubble had burst, and Holland was left in economic turmoil for quite some time, all because of a little flower.

How do Market “Bubbles” Burst?
What was the “Dot Com” Bubble?

Keywords: market performance, risk tolerance, volatility,