Bitcoin or Bit con?

Bitcoin is gold for millennials. Or maybe it’s that generation’s fine wine and collectible art. Or just a bubble waiting to burst.

For foreign-exchange analysts trying to use traditional methods to value the so-called cryptocurrency and its digital cousins, it may be all of the above – but it’s not quite a currency.

“It is difficult to use standard FX valuation frameworks that are based on the fundamental drivers of the currency, like relative productivity, or terms of trade of the country, because there are no such concepts,” said Barclays Capital’s Juan Prada.

The market capitalisation of digital currencies has soared to about $100 billion since January, with Bitcoin almost tripling in price to $2 938.50 on Tuesday.

While the technology is used as a means of payment, it may be better to view digital currencies like gold or say, a painting, than a traditional currency. Bitcoin is more volatile than even the most capricious fiat currencies and its decentralised structure makes it difficult to consider valuation.

That aligns with the view of the US Commodity Futures Trading Commission, which in September 2015 said that Bitcoin and other virtual currencies were officially considered commodities. By saying so, the CFTC was able to assert its authority to provide oversight of the trading of cryptocurrency futures and options in the future.

Nick Bennenbroek, the head of currency strategy at Wells Fargo Securities, said Bitcoin could be considered “an alternative asset”.