The tulip originated in Turkey. It was introduced into Europe in the 16th century and became highly popular in the United Provinces (now the Netherlands). Growers discovered they could produce a wide range of varieties with many different colors, some a single but vivid red or yellow, some white, and some with more than one color. These more exotic multicolored varieties arose because of a mosaic virus—a virus that caused the infected plant to produce petals or leaves with specks or patches of color.

Tulips grow from bulbs, and as the fashion grew for displaying the flowers, demand for the bulbs increased. The virus that produces the most desired multicolored flowers propagates through the bulbs, and it took several years to produce bulbs that would reliably deliver the required blooms. As demand increased, the price rose and, starting in 1634, the Netherlands was consumed by a bulb-buying frenzy that was later called the tulipomania. Within the space of two or three months, the price of a single bulb of the variety Admirael de Man rose from 15 guilders to 175 guilders and a bulb of the variety Generalissimo went from 90 guilders to 900 guilders. The most valuable variety, Semper Augustus, sold for 5,500 guilders per bulb in 1633 and in January 1637 it was allegedly worth 10,000 guilders. In 1635, some people were spending as much as 100,000 guilders to buy 40 bulbs. People told their friends about the prices they had paid for bulbs or that they had heard of others paying and as the stories circulated no doubt they improved and the numbers grew larger. Nevertheless, there was certainly a rapid inflation in tulip prices. To place these in context, in 1642 Rembrandt was paid 1,600 guilders for his most celebrated painting, The Night Watch, the annual earnings of a carpenter were about 250 guilders, and in 1636 French brandy sold for 60 guilders a gallon (13 guilders per liter).

The end of the frenzy began on February 3, 1637, in Haarlem. Florists seeking to auction tulip bulbs found there were no bidders. Prices collapsed until by May bulbs were selling for between 1 percent and 5 percent of their peak prices.

No one knows what caused the sudden rise and fall in the price of tulips. Many economists maintain that it was not a true bubble, because tulips were genuinely in demand, and the demand exceeded the supply. The national economy was recovering rapidly from a depression that followed war with Spain, and Haarlem suffered a severe epidemic of bubonic plague in the 1630s. These may have been contributing factors, but the true cause of the tulipomania remains a mystery.