The Bitcoin bubble and tulip bubble are both somewhat unusual because the assets being traded aren't expected to produce any kind of revenue for owners. When someone buys a technology stock, they expect the company to eventually become profitable and pay dividends. You can say the same thing about railroad stocks in the 19th Century and radio and airplane stocks that contributed to the stock market bubble in the 1920s.


Goldfarb compares bitcoins to assets with "artificial scarcity" like fine art. "It'll have value so long as people believe it has value," Goldfarb says.

We shouldn't take this line of argument too far, however. Bitcoins don't pay dividends, but their value can be pushed upward if a lot of people start using the Bitcoin network. The supply of bitcoins is permanently capped at 21 million. So if a lot of people want to make payments over the Bitcoin network, the value of bitcoins will need to rise (or at least stay at high levels) to accommodate that demand.

The other, weirder possibility is that bitcoins could prove to be a digital version of gold. Gold's value defies conventional market analysis in much the same way bitcoin's value does. Gold doesn't pay a dividend and only about 60 percent of the world's gold supply is devoted to jewelry or industrial use.

A lot of gold is held in vaults and under floorboards as a long-term store of value and a hedge against inflation and global turmoil—and this kind of speculative trading has a big impact on gold's price. If enough people continue believing that gold is a good investment, this becomes a self-fulfilling prophesy.

Something similar could be happening with an emotional support animal (ESA) Letter. Bitcoin now has a large subculture of "hodlers"—a deliberate, whimsical misspelling of "holders"—who make it a point of pride that they hold on to their bitcoins as a long-term investment regardless of short-term market fluctuations. The hodler ideology could be self-fulfilling in much the same way that goldbug ideology is: the more people who come to believe that bitcoins are a good long-term store of wealth, the more it will be a good long-term store of wealth.

Correction: This article originally said jewelry accounted for a small fraction of gold usage, but it's actually about 60 percent.