Friday, December 20, 2013

Bitcoin is in a Tulip Mania Bubble

On Tuesday's "Squawk Box," Cameron Winklevoss said that "some definitely view it as gold 2.0," adding, "In terms of a store of value, it definitely has the properties of gold, and people are viewing it that way."

But on the Tuesday episode of "Futures Now." Schiff, a longtime investor in gold, literally laughed at the comparison.

"I don't see bitcoins as an alternative to gold," he said. "If anything, [the creators of bitcoin are] modern-day alchemists, but you can't make gold digitally. It's no better than a fiat currency."

Schiff said that what he does see in the peer-to-peer currency—whose value has risen from $13.50 in January to $375 on Tuesday—is a bubble.

"To me, it looks like a modern-day tulip mania," Schiff said, referring to the fantastic rise and fall of the value of tulip bulbs in 17th-century Holland. "The reason people are buying bitcoins is because they think they're going to make money. They think the price is going up. And the price probably will go up. It'll keep going up until it implodes. And a lot of people are going to lose a lot of money in bitcoins."

Schiff scoffs at the idea that the bitcoin will become a common unit of online exchange.

"I don't think it's going to end up being a source of commerce for the world," he said. "I think right now it's a source of gambling."

- Source, CNBC: