It very obviously is. Nothing can grow at such an insane rate and be a stable, long-lasting thing. No one knows how high it will go, but that it will collapse hard soon is 100% sure.
The question should be, what should happen so that it stabilizes. If Bitcoin and cryptocurrency marker were to stabilize, the competition between different cryptocurrencies should mean the trade off between their different features will be directly reflected in the cost to their user. The possible features are:
- Transaction time (Bitcoin is relatively bad here)
- Transaction fee (Bitcoin is also one of the worst options here)
- Smart contacts / other integration features (Bitcoin is going nowhere here)
- Anonymity (Bitcoin isn't in the best spot here, might have the advantage of being the most commonly used BUT this is a matter of momentum only).
- Resistance to attacks from large groups of people (Bitcoin's biggest advantage, but again only a result of it's initial momentum, which might not hold forever).<p>Now you can also notice that all these features are composite. If you really want to pay for anonymity, you can tumble though the most anonymous currency. If you need smart contacts, go through eth. Resistance to nation state attack is a noble ideological concept, but has low demand, and a cheaper but weaker coin will be dominant in most scenarios.<p>You will also know a market is stabilized when there no incentives to create competition without innovating. There's nothing stopping you from creating yet another crypto coin, which will have better transaction fee and will still be as decent as others.<p>Anyway you can clearly tell the market is clueless when the talk isn't about which coins gives you the best features for the most cheap price, but instead about which coin rises the most (which is usually exactly the opposite).
You can't know. For those who are saying it is obviously a bubble: If bitcoin "succeeds" and becomes widely used as money, then its value will grow a lot more, since there can only ever be 21 million bitcoins. It is inherently deflationary. One bitcoin is worth, roughly (and circularly) speaking, the total valuation of bitcoin divided by the number of coins. Another way of looking at it: imagine bitcoins become as widespread, and as desired, as USD. Now think about how many USD are in circulation compared to BTC.<p>I know it is not really that simple, and dollars have some special properties compared to bitcoin: you have to pay your US taxes in USD, for example. Also, it is easy to talk about "valuation" (in e.g. USD, EUR) if you view bitcoin as a commodity - but if it becomes a dominant currency it is not so simple. You can still reason about exchange rates, and my point is, the asymptotic exchange rate USD:BTC (assuming no dollar inflation) is not of the order of 10000:1, but much higher, maybe 1000000:1.
As a fiat currency, it is almost by definition a bubble. It's fundamental value is essentially nil, yet it's "price" is positive. In the current equilibrium, people seem to agree that Bitcoin is a good store of value (because it is perhaps limited in supply and ownership is verifiable). Fortunately/unfortunately, other cryptocurrencies are just as useful in this regard. As such, Bitcoin's value is something of a sunspot equilibrium. Any sufficiently big shock or event could shift the focus to another cryptocurrency or other product entirely.
Such price increases may be simply a bubble (possibly a temporary bubble as we've seen in the past), but they may also be a sudden price adjustment. One explanation for such a price adjustment is an increase in the number and wealth of its users. The user base has moved from crypto enthusiasts to wealthy individuals, and now it seems to institutional investors with bitcoin futures going ahead. Such a thing didn't exist before 2009, so we don't have much to go on as far as how valuable it'll be.<p>Cryptocurrency may not be pinned in value to anything tangible, but is useful and unique as an asset class for its ability to transfer ownership by virtual means. You can't store a bar of gold in your memory, and you can't send it through a computer. I believe its long term value is in how much people want money that has this property.<p>Long term, a threat to Bitcoin's value is competing altcoins. Bitcoin is arguably a bad cryptocurrency at a technical level (high transaction fees, slow transactions, bad for the environment, etc.), it's difficult to use for commerce, but seems to be winning out against the others for now, maybe just by first mover advantage and established network effect.
You can't know that it's not a bubble. Maybe it is and crashes tomorrow. Maybe it is and crashes in a year. Maybe that crash brings it back to fundamentals but that price is still higher than it is today. If you could perfectly predict the future you'd be pretty much God.
I wonder how bitcoin will look in the aftermath of other technological novelties. Usually, these things start off as a niche novelty of an insular crowd, then savy people take part, then it goes mainstream and the influx of traffic forces regulation and more overhead due to demand. The drivers of the technology leave, then there's a slow burnout time where people try to maintain the appearence that the tech isn't dying.
When you look into bitfinexed articles regarding the Tether pump and dump and wash trading, you would be crazy to think the value of Bitcoin is sustainable.
This chart might serve as a good indicator : <a href="http://charts.woobull.com/bitcoin-nvt-ratio/" rel="nofollow">http://charts.woobull.com/bitcoin-nvt-ratio/</a> , similar to stock market P/E Ratio, it uses NVT Ratio (Network Value to Transactions Ratio).
It probably is a bubble.<p>The problem is when it bursts, we don't know if we'll be in better positions having entered now, or having entered after.