Summary Bitcoin, often compared to "Tulip Mania," has repeatedly defied skeptics by surpassing previous highs despite multiple 70% crashes, proving its resilience and growing legitimacy. Major corporations and institutions are adopting Bitcoin, integrating it into treasury strategies, and offering Bitcoin ETPs, signaling its acceptance as a strategic asset. Small-cap companies like Semler Scientific and MetaPlanet have seen significant stock price appreciation after adopting Bitcoin strategies, highlighting BTC's potential for value creation. The upcoming launch of options on Bitcoin spot ETFs will enhance BTC's market maturity, liquidity, and attractiveness, despite its inherent volatility risks. Few metaphors are as enduring in finance as "Tulip Mania." In the 1630s, the Dutch fell in love with tulips, turning them from a rare luxury into an object of mass speculation. At its peak, a single tulip bulb could be worth as much as a house, only for the market to crash spectacularly, leaving many in ruin. It was one of the earliest recorded speculative bubbles, and it's become a cautionary tale ever since. So it’s no surprise that whenever an asset's price surges, someone inevitably compares it to those infamous tulips. Bitcoin (BTC-USD), now trading above $87,000 per coin and surging above previous all-time-highs, has faced this exact comparison for its entire existence. Skeptics have dismissed it as "digital tulips" or compared it to the Beanie Baby craze of the 1990s. But the narrative is quickly shifting now that Bitcoin has a dozen spot ETFs with enormous inflows , now that Bitcoin is being adopted by various corporations as a strategic reserve asset, and now that robust US-based options markets will develop over Bitcoin via the spot ETFs. What was once seen as tulips is now being seen as a legitimate asset class, driven by adoption from individuals to small companies to major institutions. Yet, little about the Bitcoin network has materially changed. Bitcoin still works with 10 minute blocktimes, 1 MB of space per block, 2.1 quadrillion total satoshis (100 million satoshis makes 1 BTC), a difficulty adjustment every 2016 blocks, a halving every 210,000 blocks, and proof-of-work consensus. It is the world that is waking up to Bitcoin, and not Bitcoin that is changing to be more agreeable to the world. One thing about asset bubbles is that they tend to not resurge after crashing. Bitcoin, therefore, must be a very unique form of tulip, because it simply refuses to die. Here’s the log chart, so you can see how many times it has crashed over 70% but has broken out to new highs. BTC All Time (bitinfocharts.com) Very recently, we just saw a very convincing breakout through the ATH setback in 2021. This was right before BTC crashed over 70%. Here’s the 3-year chart. BTC 3YR (bitinfocharts.com) So basically, the “tulips” have done it again. This is the fourth time the digital tulip has surged up in classic tulip mania fashion, right before erasing 70% of its market cap, and then proceeding to surpass the previous high in another tulip mania. Each time, the highs and lows were higher than the highs and lows of the previous time. And each time, bears and skeptics called for the final death of the digital tulips at the bottom, usually right before another manic rally commenced. This is the fourth time BTC has surpassed the previous tulip-mania high, making this current rally the beginning of the fifth tulip mania. Five tulip manias occurring in rather orderly 4-year cycles These are some very special tulips indeed. You will note that the original tulips of the Dutch did not make a comeback after the very first mania. Bitcoin is on its fifth mania and now publicly traded corporations are buying these tulips too. Now, I’ve been heavily buying these tulips and have recommended them to everyone who would talk to me. Here’s my article published over a year ago - Bitcoin: Why I'm Buying 14-Year-Old Tulips With Both Hands . Today BTC is past 15 years old, and two weeks ago on 31 October was the 16th anniversary of the Bitcoin white paper publication. The tulips have more than 3X’d since I wrote the article, and I’m still buying with both hands. I still see plenty of upside, and here I’ll go through why. From Flowers to Corporate Treasury Asset At this point, I hope it is clear that BTC behaves less like tulips and more like an asset that is experiencing a very volatile multi-year price discovery process. It started from 0 in 2009 and is now an asset that is bigger than many (smaller) fiat currencies and bigger than silver. The landscape has changed. Major corporations are integrating Bitcoin into their treasury strategies, not as a gamble, but as a way to store their economic energy and recapitalize the business. MicroStrategy ( MSTR ) has made headlines with their Bitcoin purchases. This is a mediocre software business which has prioritized increasing BTC per share over anything else. The result is quite literally outperformance over every stock in the S&P 500 . MSTR Outperforming Everything In SPX (Saylor) The MSTR playbook is open for anyone to study. It is very easy to focus a business on acquiring BTC. The most difficult part is understanding the reason for buying BTC and developing the conviction. Once this conviction is developed, the action of focusing on acquiring BTC is almost certainly going to cause significant value creation for shareholders, as we’ll see below. Even traditional financial institutions like Fidelity and BlackRock have entered the market, offering Bitcoin ETPs. The message is clear: Bitcoin is no longer just for a fringe group of retail enthusiasts; it’s becoming a legitimate and strategic asset for corporate treasuries and institutional investors seeking diversification. SMLR And MetaPlanet: Case Studies In Bitcoin Adoption For Small-Cap Companies While the headlines often focus on large corporations, I think it’s in the small-cap space where Bitcoin’s adoption story is becoming even more compelling. Look at Semler Scientific (SMLR): a lesser-known small-cap medical services company with no debt and strong cash flows. SMLR is a good business. But the stock price didn’t reflect any appreciation for its objective achievements. The company was sitting on $60 million in cash and cash equivalents in Q1 2024. The price had fallen from the 50s to the low 20s in the first five months of 2024. In May 2024, SMLR made the bold move to start buying BTC , allocating nearly all its cash to BTC. The resulting price action speaks for itself. SMLR (Google) I’ve been bullish on this stock since the announcement of the Bitcoin acquisition strategy, as I cover in my article Semler Scientific's Bitcoin: The Next MicroStrategy? . I wasn’t even aware of SMLR's existence before that Bitcoin announcement, but it took only a glance at its strong capital structure and cash flow situation to realize that this stock could easily outperform if it started prioritizing BTC purchases. The strategy is not without doubters, even given the empirical facts of outperformance. Here was a comment from my SMLR article . Instead of buying-out other profitable niche businesses and growing the company, [SMLR] speculates on BTC. Even buying real estate, or pieces of art would be a smarter way to grow the intrinsic value of the company. Sell. The stock has rallied about 100% since this comment. At the time I responded with: Most buyouts are demonstrably overpaying. Real estate is a terrible investment - just look at how much ROE REITs generate. They are complete laggards. Art has no fungibility and is illiquid. BTC is the best place to store long term capital. Find me something else with 50% CAGR which no one entity can control. Now add on the fact that it is infinitely divisible, a bearer asset, and moves at light speed. Of course I can say "I'll wait" but let's be honest, you'll never find anything like this so I'll be waiting forever. That which constitutes good capital in the 21st century is shifting towards digital things. This trend is effectively unstoppable because the Internet has created unparalleled global connectivity and real-time updates of the world. As I stated in another response to the argument that art was as liquid as private debt (so SMLR could be better off buying art): If your measure of liquidity is against private debt then perhaps you can also send me your reasoning via carrier pigeon or the pony express. I'm sorry to bring you back to the real world, but the standard for liquidity in the digital age is increasingly approaching 24/7/365, worldwide accessibility. The writing is on the wall. Companies that get on the BTC train early are benefiting. This is simply the fact we can observe in the price action of these stocks. SMLR isn’t the only one. MetaPlanet is a tiny company in Japan that did the same thing. The price action, here in terms of the Japanese Yen, also speaks for itself. MetaPlanet (Google) A BTC strategy is not just a gimmick; it reflects a strategic play to enhance the balance sheet by injecting pristine capital into a business. If this weren’t the case, the market wouldn’t assign immediate premiums to stocks when they announce BTC strategies. It is very potent on a larger company like MSTR. But it is arguably even better to go from having no BTC to having some BTC. A small cap gets a huge amount of attention from the announcement alone, and the ability to increase BTC per share of course warrants a premium. The broader trend here is simple: small caps and private businesses have an opportunity to differentiate themselves by integrating Bitcoin into their financial strategies. As larger institutions embrace BTC, smaller players can follow suit, potentially boosting their stock valuations and creating a new wave of investor interest. I have been arguing that corporate adoption is the real catalyst during this fifth tulip mania. If more companies start buying BTC, it will send the price parabolically higher as the limited supply is squeezed. Rather than focusing on how President Trump might be crypto friendly, people need to see the big picture. Options on Bitcoin Spot ETFs: Another Gigantic Catalyst The impending launch of options on Bitcoin spot ETFs is another major benefit to BTC, bringing it one step closer to established financial assets. The reality is every single mature asset class has a robust and liquid options market. There are no exceptions. SPX, SPY, XSP, QQQ, IWM are the most liquid option chains in the world; they all have daily expiries. Then a step-down are TLT, GLD, SLV. These have expiries on Monday, Wednesday, Friday. A step-down from here would be the Magnificent 7 stocks with huge options volume, huge open interest, weekly expiries, and long-dated contracts. Options on Bitcoin ETFs means deeper liquidity and a more mature market structure, making BTC a more attractive asset for institutional investors because they will have the ability to hedge their positions. Options on BTC is a very deep topic, which I cover in the article IBIT Options Approval: Massive Watershed Moment For Bitcoin . The main thing I can see happening is that the reflexive flywheel of Option Greeks plus BTC’s absolute scarcity can create chaotic scenarios where rallies can extend by far more than what is normally considered possible. We’ve had various derivatives-driven tulip manias in smaller equities. The GME short and gamma squeeze in January 2021 was the most recent one. Like actual tulips, GME has failed to reclaim those highs. BTC will likely be very different. There is no ability to create more BTC to sell into rallies. This means price going higher is the only lever to satiate demand for BTC - and technically this doesn’t even satiate demand, it only prices out people who cannot pay the price. Risks In BTC Here’s the biggest risk I see for the corporate adoption thesis. BTC is still highly volatile, and its price can swing dramatically in a matter of days. This volatility could pose a unique challenge for corporate treasuries that choose to hold BTC. During steep market declines, companies might be tempted to panic-sell their reserves to shore up their balance sheets, potentially triggering a cascading wave of selling. This domino effect could amplify price declines and lead to broader market disruptions. However, I seriously doubt that crashes will kill BTC. It’s simply the Lindy Effect . At this point, it’s survived so many crashes that it’s becoming increasingly rational to assume that it just won’t die. Conclusion Bitcoin’s journey from "tulips" to a legitimate financial asset has been interesting. The growing adoption by corporations and the upcoming introduction of financial products like options on spot ETFs all point to a coming-of-age for the asset class. While the critics may continue to see BTC as tulips, the data tells a different story. As more companies integrate BTC into their financial strategies and institutions deepen their involvement, it becomes increasingly clear that BTC needs to at least be reclassified as “tulips with startling longevity.” In the end, whether you see Bitcoin as a bubble or the future of money, one thing is certain: these tulips have done it again—and they are almost definitely going even higher.
