Bitcoin bubble?

Huge price swing above $ 11,000 spurs debate on future of cryptocurrency

If it looks and acts like a bubble, it very well could be a bubble.

Bitcoin’s meteoric rise reminds many Wall Street pros of the irrational exuberance during earlier financial manias, such as real estate in 2007, Internet stocks in 1999 and the Dutch tulip craze in the 1600s. All of these booms, of course, ended in busts.

Whether those comparisons will prove accurate for Bitcoin, only time will tell.

The world’s most valuable and best known cryptocurrency, Bitcoin surged past $ 10,000 and $ 11,000 in a matter of hours Wednesday. But it was a wild ride with big swings in both directions, as it fell back below $ 10,000, diving 15% from its high of $ 11,377.33, according to CoinDesk.

Its highly publicized swings have raised eyebrows on Wall Street.

“It’s no wonder people are questioning whether this is a bubble,” says Craig Erlam, senior market analyst at Oanda, a foreign exchange firm with offices in New York.

Bitcoin backers view it as a currency and payment system of the future, as well as a new kind of investment. Believers say it’s an emerging alternative to the dollar, gold, stocks or bonds.

Bitcoin works off blockchain technology, akin to an anonymous digital ledger that is not regulated by any government or financial institution.

“Bitcoin is without a doubt the currency of the future,” says David Mondrus, CEO of Trive, a site that kills fake news using blockchain.

Skeptics say Bitcoin is impossible to value, wildly volatile and a speculative play that may never gain widespread acceptance.

On Tuesday, Jack Bogle, the founder of mutual fund giant Vanguard, was the latest high- profile investor to warn people to steer clear of it.

“There is nothing to support Bitcoin except the hope that you will sell it to someone for more money than you paid for it,” he said in a CNBC interview.

It took the digital currency just nine years to hit $ 10,000. The Dow Jones industrial average took 103 years.

Skeptics say Bitcoin mania will end badly.

Its skyrocketing price has similarities to the 1990s tech stock boom, says Brad McMillan, chief investment officer at Commonwealth Financial Network. “Everyone wanted tech stocks in 1999 with no regard for the underlying value,” he says. “When demand slackened, so did values. I suspect Bitcoin is in the middle of the same ride.”