Cypherpunk cryptographer and smart contract pioneer Nick Szabo is one of the most tenured and widely respected thought leaders in the fledgling cryptoverse, so his words pack an extra punch for many. He’s just notably leveled a Twitter salvo at the infamous “bitcoin is the next Dutch Tulip Bubble” thesis accordingly.
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Tulip Bubble Reference ‘Low-Thought’
And, in being a pioneer cryptographer, it’s no leap to slot Szabo on the opposite end of the spectrum from naysayers like Nouriel “Dr. Doom” Roubini who commonly charge cryptocurrencies like bitcoin as being farces in general.
The most common quip from the “nay” wing is that bitcoin is in the eye of a fierce economic bubble that’s going to burst in spectacular fashion. More specifically, detractors popularly liken bitcoin to the “Dutch Tulip Bubble” of yore, where the Dutch traders lost their minds, as it were, for over-hyped flowers.
Many in the cryptocurrency space think the analogy is absurd. Which is precisely why Szabo’s latest tweet should resonate with many — he made it clear he believes the reference is a tired cliche:
"The tulip bubble" is a popular low-thought way for lazy critics to try to insult an asset they don't understand whose price has gone up. They used the first negative cliche that came to their minds; they didn't try to or couldn't find a better comparison. https://t.co/9JWnXgTBD3
— Nick Szabo (@NickSzabo4) March 9, 2018
It’s one thing to take Szabo’s word for it, though.
It’s another thing to scrutinize, even superficially, why the Bitcoin Boom and the Dutch Tulip Bubble are different in kind. That’s precisely what one Troy University professor has done recently.
Prof. Malavika Nair: Bitcoin Doesn’t Act Like a Traditional Bubble
Troy University Assistant Professor of Economics and banking theorist Malavika Nair doesn’t think the “Bitcoin Bubble” is a thing at all.
In 2017 comments to the press, Nair argued that “whatever it is, [bitcoin’s] definitely not a bubble.” Why? The economics professor noted that bitcoin fundamentally hasn’t behaved like classical bubbles of the past, which would surge to one initial peak before decisively bursting for good.
Bitcoin, on the other hand, always seems to reach new highs after acute price crashes. That’s nothing like the “firecracker” dynamic of old bubbles.
In other words, the Dutch Tulip Bubble didn’t see a series of recoveries to new price highs before crashing down once and for all. The market hit its peak, and then it cratered. That was that.
It’s perhaps this reality that has pundits like Szabo saying “try again.”
What’s your take? Do you agree with Szabo, does the Tulip Bubble reference fundamentally miss the mark? Sound off in the comments below.
Images via Malavika Nair, AIG