From Tulips to Encryption: The Common Code of 5 Economic Catastrophes

Recently, the crypto world has been discussing “where the next bubble will be”. Instead of making blind guesses, it's better to see what history says. The pattern of economic bubbles has actually not changed since the 17th century—asset prices rise → attract speculators → prices go out of control → sudden collapse. Today, let's revisit the 5 biggest economic disasters and see if we are repeating history.

Tulip Mania (1634-1637)

In the 1600s, tulips in the Netherlands transformed from luxury items to speculative assets. A rare tulip bulb could sell for the price of a house, and investors chased them like crazy. Why? Because they were beautiful, scarce, and could appreciate in value. At the peak, the price of bulbs multiplied by dozens of times, and then… suddenly, no one was buying. Holders were left with worthless rotten bulbs, and wealth evaporated overnight.

Today's Revelation: Isn't this the story of certain virtual assets with a different name? Scarcity + speculative enthusiasm = the perfect formula for a bubble.

South Sea Bubble (1720)

The South Sea Company in Britain claimed to have a monopoly on trade with South America, with limitless prospects. Stock prices soared in a speculative frenzy, leading to the emergence of the “South Sea Effect”—the more people invested, the higher the prices rose, attracting more new investors. After the bubble burst in 1720, countless investors lost everything, including many nobles and wealthy merchants. This crisis directly shattered the British people's confidence in the financial system, with effects lasting for decades.

Link Point: This bubble is also due to “scarce business opportunities” and “promises to change the world” - sounds familiar?

Railway Mania (1845-1847)

During the Industrial Revolution, railways were the “future technology”. British railway stocks soared, attracting speculators. However, the actual returns from railway projects fell far short of expectations, and the bubble burst in 1847. Stock prices plummeted, the wealthy went bankrupt, consumer spending shrank, and the entire economy was dragged down.

Benchmarking now: Replace railways with AI, blockchain, and new energy, the plot is the same. New technology + financing frenzy + prices detached from fundamentals = time bomb.

The Stock Market Crash of 1929

This is heavyweight. The stock market was crazy in the 1920s due to low interest rates, easy borrowing, and investor optimism. Stock prices became completely decoupled from actual corporate profits, and people relied on borrowing to trade stocks. On October 29, 1929, “Black Tuesday,” the market experienced a panic sell-off, and the Dow fell 25% in one day. From peak to trough, the index plummeted 89% in 3 years. The Great Depression followed, plunging the global economy into a prolonged recession.

Why is it so serious: Leverage + panic selling + lack of risk management. This combination is deadly in any market.

Internet Bubble (1995-2000)

The internet exploded, and eBay, Google, and Amazon, which are now tech giants, were just startups at the time. Investors did not see real income but rather the “possibility of infinite growth.” The prices of internet stocks skyrocketed, even when companies were not profitable. When the bubble burst in 2000, many internet companies went bankrupt, and the stock market fell by more than 50%. An economic recession followed.

But interestingly enough—the surviving batch (Google, Amazon, eBay) really did change the world. So the bubble wasn't entirely a bad thing; it filtered out the truly valuable innovations.

General Rules of Bubbles

Observing these 5 disasters, the pattern is very clear:

1. Confidence Period: New assets/new technologies emerge, promising prospects.

2. Expansion Phase: Funds pour in, prices rise, attracting more people to follow suit, creating a FOMO mentality.

3. Crazy Period: Prices are severely detached from fundamentals, even financing/borrowing is boosting the bubble.

4. Panic Period: Smart money begins to flee, investors panic sell.

5. Collapse Period: Prices in free fall, widespread losses, complete loss of confidence.

This cycle existed during the Tulip Mania and is repeating in 2024. What is the key difference? There are more risk management tools, but human nature has not changed.

Final Words: The bubble itself is not frightening; what is frightening is not knowing that you are in a bubble. History has given us too many lessons—price surges do not equal value increases, a financing boom does not equal business prospects, and the FOMO mentality is often strongest when you are making money. Look at these 5 bubbles and ask yourself: are there similar signals in the current market?