Less than 24 hours after trading at $10,000 per coin, Bitcoin continued its upward streak and surpassed $11,000 on Wednesday, while a Nobel Memorial Prize-winning economist sounded investor alarm bells over what may be a bubble waiting to burst.
In an interview on Bloomberg, economist Joseph Stiglitz was asked if Bitcoin, the best-known cryptocurrency, could be "viable" if it were regulated. Stiglitz pointed out that "one of the main functions of government is to create currency." He explained that Bitcoin is "successful only because of its potential for circumvention, lack of oversight," referencing the fact that, as a cryptocurrency, the distribution of Bitcoin is decentralized with no central bank to mint or manage the currency.
"It’s a bubble that’s going to give a lot of people a lot of exciting times as it rides up and then goes down," Sitglitz told Bloomberg News.
He added, "so it seems to me it ought to be outlawed. It doesn’t serve any socially useful function."
"The value of a Bitcoin today is expectations of what the Bitcoin is going to be tomorrow," Stiglitz said.
But Stiglitz did argue that "the medium of exchange that we use for transaction" should be brought up to date. "Let's move away from paper, into the 21st century of a digital economy," he said.
Bitcoin has risen tenfold this year, the "largest gain of all asset classes," according to The Guardian.
"The madness of crowds is well documented, but it is quite something to behold in the flesh. It’s hard to keep up with this – bitcoin just flew past the $11,000 mark, leaping $200 in barely five minutes before taking another big leg higher," Neil Wilson, a senior market analyst at ETX Capital, told The Guardian.
Wilson added, "It’s up more than 14% today alone and the year-to-date chart is simply staggering. There are no fundamentals or technicals that explain this other than it being a massive speculative bubble."
Though Bitcoin had an exchange rate of $11,150 per coin early in the day on Wednesday, in later trading today, Bitcoin spontaneously dipped 20% within the span of 6 hours.
Watch the interview with Stiglitz below: