Michael Novogratz, a Bitcoin bull has said that the multi-billion-dollar valuation of Coinbase proves that cryptocurrencies are not “tulips.”

Coinbase Valued at $8 Billion

In a jibe aimed at the skeptics of Bitcoin and cryptocurrencies, Michael Novogratz, CEO of Galaxy Investment Partners, a cryptocurrency investment firm, has said that the reported multi-billion-dollar valuation of Coinbase, a cryptocurrency exchange, proves that the digital currencies are not tulips. He was referring to the first significant financial bubble in the 17th century. Novogratz is an ex-hedge fund manager from the Fortress Investment Group.

Coinbase, a leading US-based cryptocurrency exchange has been negotiating with investment firm Tiger Global that would value the firm at around $8 Billion according to technology website Recode and Dow Jones. The deal would put the firm in the league of the most valued start-ups in the US. As per the report, Coinbase is looking for an investment to the tune of $500 Million.

“Here’s the poster child of the crypto space worth $8 billion — that’s a real company, and Tiger’s not a flake of an investor. These are smart, savvy guys,” Novogratz said at The Economist’s Finance Disrupted conference in Manhattan earlier on Tuesday.

The Tulip Mania

Tulips were introduced to Europe in the mid-16th century and became very popular and sought after in the Netherlands. The rising demand for the tulip bulbs had driven their price unsustainably high. Finally, when people who had committed to buying the bulbs at high prices, declared that they were unable to pay, a massive crash followed in 1637.

Many skeptics including Billionaire hedge fund manager Ken Griffin have compared the rise of cryptocurrencies to the tulip bubble. He had earlier said about the tulip craze “many of the elements of the tulip bulb mania we saw back hundreds of years ago in Holland.” Berkshire Hathaway CEO Warren Buffett has equated Bitcoin to “rat poison.”

LBN_MIT Salesforce Bitcoin Bubble

Is Bitcoin a Bubble?

Bitcoin, the first cryptocurrency of the world, came into limelight in 2017 for its massive rally from $1200 at the beginning of 2017 to $20,000 by December, prompting some economists, investors and market observers to call it a bubble. After reaching its peak, Bitcoin’s price had a correction of 70%. Altcoins including Ethereum and Ripple had similar bull runs followed by a decline of close to 90% in value.

The exponential rise followed by the crash drew comparisons to the tulip bubble of the 17th century and dot-com bubble of 2000. However, supporters like Novogratz have argued that digital currencies and the underlying blockchain technology are here to stay. According to them, such corrections are typical for the digital asset, and each subsequent rally has taken the price beyond the previous high.

The growth of Coinbase and its multi-billion-dollar valuation by a credible investment firm like Tiger Global does indeed raise the level of confidence among investors and as Novogratz says is a bullish sign for the industry’s legitimacy.

In your opinion, is the comparison of Bitcoin and cryptocurrencies to the tulip bubble by the skeptics justified? Let us know in the comments below.

Images courtesy of ShutterStock

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