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Bitcoin enthusiasts rejoiced on Monday as 1 BTC traded at $10,000 for the first time.
The celebration was short lived, but not because it immediately crashed back to earth. Just one day later, Bitcoin hit $11,000.
The meteoric rise in value of Bitcoin in 2017 has left skeptics flabbergasted—and warning that people buying in risk losing a healthy amount of money. At this point, it’s a little hard not to understand their concern. Bitcoin’s value has risen so quickly that it’s been drawing comparisons to other historic bubbles, such as the infamous Dutch tulip mania.
It’s easy to see why. In 2017 alone, Bitcoin is up a whopping 1,000 percent. To put that in perspective, the Dow Jones Industrial Average (the most widely followed stock index) is up 193 percent… since 1997. That’s 20 years of investment in what is generally considered to be the best long-term investment, and it doesn’t even come close to what Bitcoin has done this year.
This has led to some very serious people sounding very serious alarms. Ken Griffin, head of the massive Citadel hedge fund, warned on CNBC that the price increase has the hallmarks of a bubble—in particular people buying in with the expectation of short-term price increases.
“I get very worried that people that are buying bitcoins don’t really understand what they’re participating in other than the headline stories that it keeps going higher and ‘I want to make sure I don’t miss this opportunity to make some money,'” Griffin said on CNBC. “So is it a fraud? No. But these bubbles tend to end in tears. And I worry about how this bubble might end.”
A variety of major figures in finance are offering similar warnings. William Dudley, president of the Federal Reserve Bank of New York, called the recent movements “speculative activity.”
Others are making even more definite predictions about a near-term decline. Jim Cramer, a well-known commentator on CNBC, intimated that the steep rise is about to be answered by a steep fall.
That’s downright tame compared to others, who are even calling for drastic action in response to Bitcoin’s ascension.
Joseph Stiglitz, a Nobel prize-winning economist, said during a Wednesday interview with Bloomberg TV that Bitcoin should be illegal.
“So it seems to me it ought to be outlawed,” Stiglitz said. “It doesn’t serve any socially useful function.”
Doesn’t get much more skeptical than that.