The rational-bubbles theory also does not account for the association of price surges with high volatility and high trading volume. This greater-fool theory, or Ponzi scheme theory, must break down at some point, or rely on an irrational belief in the next fool. If a price goes up forever, eventually the value of Bitcoin must exceed all of US wealth, then all of world wealth, then all of interplanetary wealth, then all of the atoms in the universe. Rational bubbles are intriguing but fundamentally flawed. The first two explanations are called “convenience yield” the latter is a “rational bubble.” If the price is greater than zero, either people see something that acts like a dividend, some value in holding the asset beyond its cash payments, or they are willing to hold the asset despite a lower expected return going forward, or they think the price will keep going up forever, so that price appreciation alone provides a competitive return. So right off the bat we have a problem-and a case that suggests how other assets might have value above and beyond their cash dividends. Bitcoin has no cash dividends and never will. The first concept of asset pricing is that price equals the expected present value of dividends.

It strikes me as a fairly pure instance of a regularly occurring phenomenon in financial markets, one that encompasses some “excess valuations” in stock markets, gold and commodities, and money itself. What the heck is up with Bitcoin? Is it a bubble? A mania of irrational crowds? It’s up more than 650 percent since mid-July, but over two weeks in December, it lost more than a third of its value.

Today, the day I’m writing this, it’s gone from a daily high of $16,269.69 to a daily low of $13,957.91, a 16 percent swing in a day. It has shot up in value in the last year-as I write in December 2017, around $15,000. Bitcoin has been around 10 years, but it’s still making headlines.

Bitcoin stock price 2017