Sunday, February 5, 2023

Nick Szabo Says Bitcoin ‘Tulip Bubble’ Reference Is Just ‘Lazy Critics’

Nick Szabo Says Bitcoin ‘Tulip Bubble’ Reference Is Just ‘Lazy Critics’

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’

Szabo, who recently called trust a “vulnerability” at Blockstack Berlin, has no shortage of strong opinions when it comes to the cryptocurrency ecosystem.

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:

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.

Nair pictured.

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

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