Experts: Virtual Currency 'Bitcoin' Boils into a Bubble

Sunday, 07 Apr 2013 10:29 AM

By Dan Weil

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The Bitcoin virtual currency is all the rage, more than doubling in value since the onset of the Cyprus crisis. And experts say that has placed the Internet currency squarely into bubble territory.

"We're beyond the point where Bitcoins are only talked about among the early adopters,
like tech geeks," Jesse Colombo, an independent financial analyst who tracks bubbles on
TheBubbleBubble.com, told CNNMoney.

"We're seeing a lot of enthusiasm, greed and delusion."

Declassified: ‘Financial War’ Could Wipe Out 50% of Your Wealth’

The Bitcoin now trades at $135, up 187 percent from $47 March 16 and just 5 cents in mid-July 2010.

"It is rare that we get to see a bubble-like phenomenon trade tick for tick in real time," Art
Cashin, UBS director of NYSE floor operations, told CNNMoney.

"But all that may be changing before our very eyes -- quite literally."

The buying binge of Bitcoins has come as the Cyprus crisis made investors afraid of paper
currencies.

"I could understand a long-term uptrend based on worries about paper money," Colombo
said. "But there's no real catalyst for the market to go up as vertically as it has."

If it was just Cyprus, gold, a traditional haven in times of currency trouble, should have soared too, he said. Instead it tumbled to a 10-month low last week.

The total value of Bitcoins has surpassed $1.4 billion. But Ben Laurie, a software engineer and visiting fellow at Cambridge University, is skeptical.

“What’s behind that billion-dollar value?” he asked in The Washington Post. “Nothing, except some people would claim $1 billion worth of burned electricity.”

Declassified: ‘Financial War’ Could Wipe Out 50% of Your Wealth’

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