This simply can’t last.
Bitcoin prices crashed in July to about $70, and many wrote off the alternative currency as dead — but now that the rally has begun in earnest again, some investors are being duped into thinking that there is nothing but upside in this odd digital alternative to money or gold.
There are plenty of people who will contend that Bitcoin isn’t a bubble, that it’s a viable alternative currency in an era of corrupt central banks and a lack of faith in gold as the hard asset of choice that it used to be.
But the reality is that any investment that tacks on double-digit gains every week and starts attractive investors simply because it goes up is by definition a bubble.
Bitcoin might stick around as an alternative currency, but these valuations will not. Speculators, particularly in China, have caused Bitcoin prices to soar, and it’s only a matter of time before those traders take their money and run … leaving those who buy Bitcoin at the top to hold the bag.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.