Why Commodities and Crypto Keep Repeating the Same Mistakes

Here is a question that bothers me. We have thousands of years of recorded history. We have examples of every possible financial mistake. We have libraries full of books about market crashes. And yet people keep doing the same thing over and over.

That is basically what Torsten Dennin sets up in the introduction to “From Tulips to Bitcoins.” The whole book is 42 stories of booms and busts. But before telling those stories, he explains why commodities matter and how the cycle keeps repeating.

What Even Are Commodities?

If you are new to this, commodities are the raw stuff the world runs on. Think energy (oil, gas), metals (gold, silver, copper, iron), agriculture (wheat, corn, sugar), and even livestock. Basically anything that comes out of the ground, grows in a field, or walks around on a farm.

Here is the thing. Commodities are not some new fancy idea. People have been trading them for thousands of years. The Sumerians were doing organized commodity trading way before stock markets existed. Yes, stock exchanges are actually younger than commodity markets. Most people get that backwards.

But for regular investors, commodities became a big deal around the year 2000. Banks started marketing them as a “new asset class” and created investable commodity indices. The first ones showed up in the early 1990s. By the 2000s, everyone was talking about putting money into oil, gold, wheat, and copper.

The China Factor

So what started the big commodity boom? One word. China.

China’s economy grew so fast that it changed worldwide demand for everything. They needed oil. They needed iron. They needed copper. They needed all of it, and they needed a lot. To put this in numbers, about two-thirds of the world’s iron ore goes to China. Two-thirds. That is a staggering amount of demand from one country.

And the numbers for commodities overall are huge. The crude oil market alone is worth about 2.2 trillion dollars per year. That is 100 million barrels of oil every single day. Gold mining produces around 3,500 tons per year, and all the gold ever mined in human history sits at about 190,000 tons. That pile of gold is worth roughly 8 trillion dollars.

These are not small numbers. This is the foundation the modern world is built on.

The Boom and the Bust

So China was growing, commodity prices were going up, everyone was making money. Then 2008 happened.

When Lehman Brothers collapsed, it took commodity prices with it. Crude oil crashed from 150 dollars per barrel all the way down to under 40. That is a 70% drop. Imagine putting your savings into oil and watching them shrink by more than two-thirds.

But gold did something different. Gold actually went up. It passed 1,000 dollars per ounce for the first time ever and kept climbing. By 2011 it hit 1,900 dollars. People were scared about the financial system, and they ran to gold because that is what people always do when things get bad.

Then in April 2011, the whole commodity market turned south. A five-year bear market started. Crude oil fell back to 26 dollars per barrel by 2016. From 150 to 26. If you bought oil at the top, you lost more than 80% of your money.

And then, of course, the cycle turned again. Prices started going back up.

The Pattern That Never Changes

Here is what Dennin keeps coming back to. The pattern is always the same. Prices go up. People get excited. More people pile in. Prices go crazy. Then everything crashes. Then everyone says “how could this happen?” And then a few years later, it happens again.

This pattern goes back to 1637 when Dutch people were paying more for tulip bulbs than for houses. It happened with gold rushes, oil booms, silver corners, and diamond markets. And it happened with Bitcoin.

Speaking of Bitcoin. It was released in January 2009, right when the financial world was falling apart. Since then, over 4,000 alternative cryptocurrencies appeared. And crypto went through the exact same boom-bust cycle that commodities have been going through for centuries. Prices went up, everyone got excited, more people piled in, and then it crashed. Nothing new under the sun.

What’s Coming in This Series

The book covers 42 stories spanning almost 400 years. You will read about Rockefeller controlling 90% of the oil market. About Onassis building a shipping empire. About Buffett, Gates, and Soros making their moves in commodities. About weather events like hurricanes and droughts moving entire markets.

But the two biggest stories frame the book. It opens with tulip mania in 1637 and closes with the Bitcoin crash in 2018. Almost 400 years apart, but the same human behavior driving both.

Why This Matters

I think the reason these stories keep repeating is simple. Every generation thinks they are smarter than the last one. Every generation thinks “this time is different.” But it never is.

The technology changes. The specific commodity changes. The country at the center of the boom changes. But the human emotions stay exactly the same. Greed on the way up, panic on the way down.

And that is why a book about commodity markets from tulips to Bitcoin is worth reading. Not because you will learn about oil prices or gold mining. But because you will see the same mistakes repeated over and over. And maybe, just maybe, you will recognize the pattern the next time it happens.

Next chapter, we go all the way back to 1637. To a time when a single tulip bulb sold for more than most people earned in a year. Tulip mania is where it all started, and it is a wild story.

Previous: Start of Series

Next: Chapter 1: Tulip Mania

This is part of my From Tulips to Bitcoins book retelling series.