Bitcoin’s value crossed the $15,000 threshold for the first time today, marking another milestone in its dizzying ascent. In recent months, the cryptocurrency has undergone a staggering increase in value; surging from roughly $3,500 in mid-September to its current price. And at the start of the year, a single Bitcoin was worth less than $800.
What happens next is anyone’s guess, and most analysts are united only in their uncertainty over the cryptocurrency’s future. Bitcoin long ago stopped being useful for actually buying things (partly because of its rocketing value and partly because of achingly-slow transaction times), so the questions facing speculators are: is this a bubble? And if so, when will it burst?
Some traders figure we’re getting close, and are preparing to short Bitcoin; that is, make bets that its value will decrease in the future. “[It’s] one of the greatest shorting opportunities ever,” cryptocurrency Lou Kerner told Bloomberg earlier this week. “You have a lot of zealotry, and a lot of people, including me, who think it’s the greatest thing to ever happen in the history of mankind. You have a lot of people who think it’s a bubble and a Ponzi scheme. It turns out both of them can’t be right.”
Although the general trend for Bitcoin’s valuation is only up, the cryptocurrency has been extremely volatile. On November 29th, for example, its value fell 20 percent in less than an hour and half; dropping from over $11,000 a tick above $9000. For true believers, such blips are only temporary, but skeptics caution that any plunge could end up being permanent. After crossing $15,000 earlier today it’s value quickly dipped down to around $14,800.
Bitcoin’s skyrocketing valuation has also brought with it a new problem: energy costs. It takes enormous amounts of power to sustain the Bitcoin network, and, according to a report from Ars Technica, it’s estimated that the cryptocurrency currently consumes as much electricity annually as the whole of Denmark. Predicting exactly how this consumption will rise or fall in the future is difficult (it depends on things like the rate at which new bitcoins are mined and the number of transactions), but given that Bitcoin only currently has use as a speculative asset class, it seems unsustainable.
Meanwhile, financial experts are struggling to make sense of the phenomenon as a whole. One analyst quoted by the Financial Times, Walter Zimmerman, suggests that the best way to look at Bitcoin is as an absurd video game with no boundaries. “Users of other currencies find utility in a stable value. But not here in Bitcoin world,” writes Zimmerman. “The reality of Bitcoin is that users are also players. And the objective of this game is the highest possible score.” But how much higher can it go?