Bitcoin investors have profited handsomely by ignoring the advice of some of the financial world's most prominent figures, including JPMorgan Chase (JPM) CEO Jamie Dimon, who recently denounced it as a "fraud," and Warren Buffett, who likens it to a "mirage."
While that view may ultimately prove correct, with even buyers of the digital currency warning of a bubble, the value of Bitcoin continues to soar into the financial stratosphere. Bitcoin prices hit an all-time high of $5,829 on Friday and jumped nearly 500 percent since the start of the year..
Bitcoin's market capitalization as calculated by CoinMarketCap is more than $95 billion -- that tops the market value of Goldman Sachs (GS) and Morgan Stanley (MS), two of Wall Street's biggest players.
The jury remains out on how long -- or if -- the good times will last given the unpredictable nature of the market for digital money. One reason for the latest run-up in Bitcoin are rumors that China will reverse its recent decision to ban cryptocurrency exchanges. Fans of the currency also note that it is gaining more acceptance with consumers, with ATMs springing up in multiple states around the U.S.
But Kevin Werbach, an associate professor of legal studies and business ethics at the University of Pennsylvania's Wharton School of Business, sounds a note of caution, and contends that the price of Bitcoin is being fueled by "speculation and, quite likely, by manipulation through some of the exchanges."
"Speculative bubbles always go up until they pop, but no one can be sure when that will be," he said by email. "There's no good reason why cryptocurrency prices have inflated so tremendously over the past year. That means they could also go down with no good reason."
In a note to clients today, UBS analysis expressed skepticism that cryptocurrencies will ever achieve mainstream acceptance. A "twentyfold increase in Bitcoin prices in just two years, and an absence of any fundamental economic backing, cryptocurrency prices are almost certainly a bubble," they wrote.
