Bitcoins just keep going up and up. As of Wednesday morning, bitcoin exchange Mt. Gox had the value listed at $141, and the volume of bitcoin trades causing a major lag in trading and the cancellation of orders, according to the exchange’s Twitter feed.
Just last week, a bitcoin was worth $88, and if investors were to buy into it four years ago, they would have seen 117,000 percent return — last week. That kind of return is the same as the S&P 500 (INDEXSP:.INX)’s return, including reinvestments of dividends, starting all the way back in 1943—except that it happened in four years instead of 70 years. At $140, the return in fours years for Bitcoins is equal to the return of the S&P 500 (dividends included) since 1928!
And today the bitcoin is worth even more.
Barron’s contributor Ben Levisohn questions whether the bitcoin is now a bubble. Over the past month, he said it’s jumped over 200 percent. It certainly sounds like a bubble. He spoke with a currency strategist who said it’s a basic issue of supply and demand.
For example, comparing the supply of bitcoins to the supply of the U.S. dollar tells us that there are very few bitcoins that have been found.
And then there’s the demand side of the issue, which could change if people decide they don’t want or need it any longer. Governments around the world are even considering trying to regulate the bitcoin, so there’s a high amount of uncertainty surrounding this pseudo-currency.
Other writers question if bitcoins are even a currency at all. Reuters published a blog by Felix Salmon, who said they behave more like a commodity than a currency. He also points out how dangerous it is to turn a commodity into a currency, using a loan as an example. If someone took out a loan in bitcoins even just a few weeks ago, that person would never be able to finish paying it off now because the value of the currency has exploded in just a short time.
So what if analysts were to place a price target on bitcoins? Business Insider published a post by Henry Blodget, who jokingly said he would raise his price target on the currency/commodity to $400. Then he points out that there’s no price target anyone could set on it right now because there is so much uncertainty involved.
It could be worth thousands of dollars tomorrow, or the government could declare it illegal and it would be worth nothing. There’s just no saying where bitcoins will go next.
