Bitcoin stocks
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Throughout history, investment bubbles have emerged around things such as tulips, uranium, real estate, dot-coms and housing debt. But perhaps none is crazier than the recent panic buying of bitcoin.

Even after a late-December swoon, the price of a single bitcoin ended 2017 at nearly $14,000. That’s a fourteenfold increase from where it started the year, this at a time when usage of bitcoin for its intended purpose — as a computerized method of transferring value — was up only modestly.

By Wednesday evening, bitcoin was back to about $15,000 amid word that a venture-capital firm co-founded by Peter Thiel, one of Silicon Valley's biggest names, had placed a major bet on the cryptocurrency

OPPOSING VIEW: Blockchain technology behind bitcoin is worth it

Do investors, if that is the right word, know the value of what they are buying? Do they even know the nature of what they are buying? Gauging from the run-up, the answer to both questions appears to be no. 

Their name notwithstanding, bitcoins aren’t really a currency. They lack the one thing common to currencies: widespread acceptance. They also lack the tangible qualities that are the hallmark of commodities.

They function as a method of exchanging real currencies in a way that bypasses the confiscatory fees of banks and the prying eyes of governments. They behave like stock in a red hot company whose sole product is an elegant form of encryption that keeps bitcoins from being counterfeited or stolen.

Just how useful bitcoins will be in the future is anyone’s guess. They might well have a purpose in competing with banks and limiting the power of governments.

For the time being, however, they are most useful to drug dealers, tax evaders and people who live in countries with onerous capital controls.

Considering this limited usage, and the fact that there is nothing to stop competitors from emerging, the notional value of all bitcoins ($250 billion) seems fantastically steep.

As a point of reference, the company that owns the New York Stock Exchange and multiple other exchanges worldwide is worth $41 billion.

Why are people bidding up bitcoins to such absurd levels? Many of the usual rationales are in play. In the past 30 years, fortunes have been made by pouring money into companies that were poorly understood or struck conventional investors as overpriced. And to many speculators of today, bitcoins seem like the latest in this trend. But bitcoins also offer something unique: a (misguided) sense of purpose.

Among those snapping them up are investors who think they are doing the world a favor. They see bitcoins gaining widespread acceptance and eventually replacing traditional currencies, eroding the power of governments and ushering in a new libertarian era. All we can say is, good luck with that.

The future of bitcoins is murky. What is not so hard to see is that they make other investing crazes look tame. Even if your idiot neighbor claims he made a bitcoin killing, we'd suggest alternative investment vehicles for the family nest egg.

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Sascha Steinbach, epa/EFE