Eric Balchunas from Bloomberg addresses the Bitcoin-tulip analogy, highlighting 17 years of recoveries, demand for ETFs, and the scarcity driven by halving events as evidence of Bitcoin’s lasting value.
Summary
- Balchunas points out that Bitcoin has risen about 250% over the last three years and 122% in 2024, despite a recent 27% decline from its October peak.
- He argues that non-productive assets like Bitcoin, gold, art, and rare stamps maintain value through scarcity and demand, unlike the ephemeral 1630s tulip bubble.
- Supply reductions from halving events, the accumulation of ETFs, and on-chain holding metrics indicate that recent corrections are part of normal consolidation, not a systemic failure.
Bloomberg ETF analyst Eric Balchunas has refuted the similarities drawn between Bitcoin and the Dutch tulip mania of 1637, citing the cryptocurrency’s 17-year history and multiple recoveries as proof of its resilience as an asset class.
In a December 6 social media update, Balchunas remarked that Bitcoin is up around 250% over a three-year period and has increased 122% in 2024, despite a 27% pullback from its October peak.
“Tulips surged and collapsed within a few years; they were punched and knocked out. Bitcoin has rebounded from various significant shocks to achieve new highs and has endured for 17 years,” Balchunas shared, per his public comments.
The analyst, who monitors spot Bitcoin exchange-traded funds, noted Bitcoin’s durability through major market disruptions, including exchange hacks, banking crises, the downturn of initial coin offerings in 2018, pandemic-induced volatility, and notable project failures.
As of early December, Bitcoin ETFs possessed a substantial amount of assets under management, with institutional participation offering stability during market downturns.
Balchunas stated that non-productive assets can hold value without yielding income or dividends. “Both Bitcoin and tulips are non-productive assets. However, so is gold, so is a Picasso, and rare stamps—would you compare those to tulips? Not all assets need to generate productivity to be valuable,” he emphasized.
He observed that Bitcoin’s recent dip was a correction from inflated levels rather than a systemic collapse. “Reflecting on Bitcoin’s year, the only significant occurrence was that it relinquished the extreme excesses of the previous year,” Balchunas noted in a follow-up post.
Gold’s market cap doesn’t produce yields, yet the metal retains considerable value due to its scarcity and longstanding acceptance as a reliable store of value, financial analysts believe. Advocates for Bitcoin contend that the cryptocurrency serves a comparable role, with additional applications in remittances and corporate treasury management.
The forthcoming 2024 Bitcoin halving is set to reduce new issuance, tightening supply as ETF demand rises, according to blockchain metrics. Recent on-chain data indicated significant accumulation by larger holders during price declines, with a considerable amount of Bitcoin supply remaining inactive for over a year.
Valuation metrics like the MVRV Z-Score showed signs of undervaluation in comparison to historical bullish market signals, as noted by cryptocurrency analysts.
The Dutch tulip mania spanned roughly three years from 1634 to 1637, with prices crashing after reaching unprecedented heights. Launched in 2009, Bitcoin has gone through multiple boom-and-bust phases, emerging with new highs after each cycle.
Balchunas concluded that market participants were “overanalyzing” short-term price fluctuations, suggesting that periods of asset consolidation are common in long-term investment patterns.
