Like the Energizer Bunny or like Timex watches, bitcoin just keeps on ticking, soaring to a new record of $28,289 over the weekend.
Analysts have offered a panoply of reasons for the rally in the digital currency: bitcoin is a hedge against the falling dollar; bitcoin is a hedge against non-existent inflation; bitcoin is being purchased by major companies; bitcoin will one day be used in legitimate commerce; bitcoin is being lauded by mainstream players such as investor Paul Tudor Jones, money manager Bill Miller, PayPal (PYPL) – Get Report and Square (SQ) – Get Report.
But there’s only one real reason to explain bitcoin’s 271% explosion so far this year: market mania. When Fred hears that his neighbor Harry has profited on a portion of that gain, Fred wants in on it too. Fred likely also fears missing out on easy money if he doesn’t hop on board the speeding train.
Bitcoin recently traded at $26,621.18, down 1.97%, as investors and speculators apparently were taking profits on the upward surge.
Keep in mind that bitcoin’s path hasn’t been straight up. It plunged 52% from Feb. 12 to March 12.
What bitcoin really represents is a store of value. But it’s only a store of value because people perceive it that way. It has no intrinsic value beyond people’s desire to buy it. That’s quite different from a stock or a bond which produces income.
So maybe you can dive right in and ride bitcoin up to $400,000. But then again, maybe you’d ride it down to $1,000 instead.