Is bitcoin in a bubble?
The price of bitcoin has been soaring this year, and last week alone it jumped from $11,000 to well over $17,000, according to Coindesk. It started the year below $1,000.
That rocketing level of appreciation smells a lot like an irrational investor mania to many economists and financial pros, the kind that sent prices for unprofitable startup internet companies soaring in the dot-com boom. Those prices eventually came crashing down.
“We saw this in the 1990s,” says Barry Ritholtz, chairman and chief investment officer of Ritholtz Wealth Management.
Like many others in finance, Ritholtz expects the bitcoin bubble to pop. The only question is when. “Some people think it’s early days, some people think it’s late,” Ritholtz says. “We’ll find out in the not-too-distant-future who is right.”
Robert Shiller and Joseph Stiglitz, two Nobel-prize winning economists who’ve seen their share of speculative manias, recently have called bitcoin a bubble. Stiglitz went so far as to tell Bloomberg TV that bitcoin should be “outlawed.”
Bitcoin was created in hopes it would become a new kind of currency that people could use outside of the traditional banking system, without backing from any country or central bank. It was also supposed to operate outside of government oversight, which has raised concerns that it will be a haven for criminals.
