Tuesday 03 February 2026 5:15 am | Updated: Monday 02 February 2026 11:33 am On this day in 1637: The tulip bubble bursts By: Eliot Wilson
Tulip fever is often cited as a cautionary tale about the perils of capitalism and collective hysteria, but what truly unfolded during this infamous episode? Asks Eliot Wilson.
The Rise of Tulip Mania in the Dutch Golden Age
During the first half of the 17th century, the United Provinces of the Netherlands reached the peak of its Golden Age. This small yet industrious nation had amassed significant wealth through monopolies on the spice trade and encroachments into Portugal's sugar commerce. As material prosperity grew, so did the fascination with exotic novelties, particularly tulips.
These vibrant flowers, originating from the Ottoman Empire's Anatolian region, arrived in Amsterdam and Antwerp towards the end of the 16th century. Their intense, saturated colours captivated the Dutch merchant classes, leading to an obsession that saw prices soar beyond any rational measure of value. By the mid-1630s, tulip mania had emerged as the first documented asset bubble in commercial history.
The Botanical Appeal and Financial Mechanics
Botanist Carolus Clusius, a professor at the University of Leiden, played a pivotal role by demonstrating that tulips could thrive in the Low Countries' climate. The flowers were categorised into four main groups:
- Couleren: Single-hued varieties in red, yellow, or white.
- Rosen: Red or pink blooms with white streaks.
- Violetten: Purple or lilac backgrounds with white markings.
- Bizarden: The rarest and most prized, featuring red, brown, or purple petals with yellow or white streaks.
Tulips bloom briefly in April and May, but their bulbs can be uprooted and traded in summer, making them durable assets. This characteristic fuelled the development of sophisticated financial instruments. Spot market purchases occurred between June and September, while forward contracts, known as windhandel or "wind trade," were signed for the rest of the year, often witnessed by notaries.
The Speculative Frenzy and Its Collapse
By 1634, speculators had entered the market, driving prices to extraordinary heights. For instance, when Rembrandt was paid 1,600 guilders for The Night Watch in 1639, it was considered a substantial sum, yet single tulip bulbs could command hundreds of guilders. At the peak, a rare "Semper Augustus" bulb was valued at 10,000 guilders—enough to buy a grand canal-side house in Amsterdam.
This speculative bubble relied on continuous trading of contracts, with some changing hands up to 10 times a day by 1636. However, on 3 February 1637, the market faced a fatal setback. At a tavern auction in Haarlem, an auctioneer failed to secure buyers despite lowering prices repeatedly, triggering a panic.
The Aftermath and Historical Myths
Liquidity evaporated almost instantly, leaving leveraged speculators with worthless equity. Fire sales ensued, with many recovering only 5% or less of their investments. Forward contracts proved unenforceable, and despite a 1610 ban on short selling, disputes were largely resolved privately, often with buyers reneging on obligations.
Scottish journalist Charles Mackay popularised the tale in his 1841 work, Extraordinary Popular Delusions and the Madness of Crowds, portraying it as a symbol of mass irrationality. Yet, modern research, such as Anne Goldgar's 2007 book Tulipmania: Money, Honor, and Knowledge in the Dutch Golden Age, suggests the impact was exaggerated. Few were involved, primarily merchants and skilled craftsmen, and no bankruptcies were directly linked to the trade.
Why the Story Endures
The tulip mania narrative persists partly due to Calvinist ministers in Amsterdam, who used it as a moral lesson against luxury and godlessness in a prospering society. It was satirised and demonised into a dramatic tale of avenging angels, yet the Netherlands largely escaped unscathed. The bubble did undermine confidence in windhandel agreements, but it was not a crippling blow to Dutch capitalism.
In essence, tulip mania serves as a compelling parable, but its reality is more nuanced—a fleeting financial tremor rather than a catastrophic crash.
