Bitcoin‘s price surge past $7,400 for the first time today, just days after Chicago-based CME gave its stamp of approval for bitcoin’s futures trading.
But UBS analyst Paul Donovan warned that the digital currency could be on the brink of a crash after surging ahead of its arrival on the futures market.
Mr Donovan likened the bitcoin craze to the tulip craze which is widely seen as the first example of an economic bubble.
He tweeted: “Amsterdam 1636. Cash-settled futures markets in tulip bulbs start. Prices soar. Amsterdam February 1637. Tulip bubble bursts.”
But not everyone is afraid that the bitcoin bubble could burst, and some experts believe that bitcoin’s core user base is enough to keep it alive.
Iqbal Gandham, UK Managing Director at eToro, believes that bitcoin’s trajectory will eventually correct itself and keep climbing.
He told Express.co.uk: “We don’t think there is a market bubble. There will likely be a correction, as there is every time we see a sharp rise, but viewed through the lens of the last two to three years, bitcoin has risen steadily.
“This latest rally has been in part driven by CME’s decision to launch bitcoin futures later this year, which is anticipated to bring more investors to the asset, and is the latest sign that bitcoin is moving into the mainstream.
Bitcoin bubble: Experts are arguing whether or not bitcoin is heading for collapse
“Additionally, we think that the prospect of the upcoming November fork in bitcoin’s blockchain is also driving investors towards the currency.”
We don’t think there is a market bubble
Looking towards the future, Mr Gandham is confident that bitcoin has a way to go before it becomes a mainstream form of finance. But he believes that more and more people will realise its potential in due course.
Some experts are also comparing bitcoin’s rise to the DotCom bubble, which was a period of intense commercial growth for the internet between 1997 and 2001.
The DotCom bubble led to the crash of several web-based giants, with only a handful of prominent websites such as Amazon.com and eBay.com pulling through.
Nicholas Gregory, founder and CEO of cryptocurrency enabler CommerceBlock, said he thinks there is enough potential in bitcoin too avoid a similar fiasco.
He told Express.co.uk: “It’s no secret that the price of bitcoin has risen dramatically and a correction could be on the cards. But even if that happens you won’t have seen the back of it.
“Fiat currencies like the Pound and Dollar frequently make wild moves and I firmly believe cryptocurrencies are the future of finance.
“Just compare what’s happening to the hype around the DotCom Bubble. Many companies went under but out of its ashes came Amazon, Facebook and Google. The bold and the good go on to succeed and change the landscape forever.
Bitcoin bubble: Some analysts are likening the bitcoin craze to the DotCom bubble of the 1990s
“The only difference here is that people are getting excited about a business that doesn’t just provide a service that makes money, it is money.”
Mr Gregory added that bitcoin is bound to stumble and fall, but its underling core user base will continue to integrate the token into everyday life to ensure its survival.
Right now bitcoin’s arrival on the future’s market by the end of the year is the first big step towards that goal.
In some ways it indicates shifting paradigms and a sign that the financial sector itself is slowly warming up to the digital currency.
Gary McKay, CEO and founder of blockchain start-up APPII, said that bitcoin’s growing mainstream appeal will still be marred by its volatility for now.
He told Express.co.uk: “Undoubtedly, we’re staring at the horizon of a token economy – where cryptocurrencies like Bitcoin and Ether will be used to easily pay for goods and services instead of the traditional pound.
“The rise of this new token economy has been clear to investors of Bitcoin and cryptocurrencies for a while now.
“But, the rise in cryptocurrencies’ overall value will bring high levels of volatility in its price as sophisticated investors lock in profit.”
Mr McKay added that the future of cryptocurrencies “is coming at us very quickly”, but in time, everyone will have a share of the value.