Is Bitcoin a bubble?

Last post on this topic!  Jerry Brito reports:

The arrow notes the date my column on the virtual currency was published in TIME.com. The day after that piece was published, the Bitcoin exchange rate reached an all time high at $1.19. Yesterday, just over a week later, it was pushing $2.

Via Chris F. Masse, Reuben Grinberg (in a useful paper) reports:

In late April, 2011, one bitcoin is approximately at parity with the US Dollar — a 2000% percent appreciation against the Dollar in less than a year.

Of course, that’s the appreciation you might expect from a highly successful private asset!  Or you can take that as a sign of the dependence of the Bitcoin upon expectations, and a sign of its bubbly nature.  Just think how hard it is for a major country to establish crediblity for its currency, and then ask how much of the Bitcoin value is expectations-dependent and multiple-equilibria dependent.  What will be the rate of Bitcoin appreciation five years from now?  I guess it will be falling.

If you are thinking about holding Bitcoin, here is a Fischer Black paper worth reading.