Why do you even ask whether it is? A price gyrating like this is proof perfect of bubble behaviour. However, please do note that the existence of a bubble is not evidence that Bitcoin will either fail or succeed. There are often bubbles in things that succeed, just as much as the rubble of a bubble shows a failure.
The bubbleicious behaviour is of course the price gyrations going on.
Bitcoin’s value hit $900 on Mt. Gox exchange around 5 p.m. PST Monday, up more than 70 percent from Sunday’s close and setting an all-time high in the process. But, it also just dropped to $650 within the past 30 minutes, highlighting the current volatility of Bitcoin. The value of Bitcoin only hit $400 for the first time last week, and $500 for the first time on Sunday.
Wild price changes as a result of speculation purely about the future value of something. Yup, that's bubble style behaviour.
However, as I say, don't take this as being an insistence that Bitcoin will never be used for anything, will never become a successful alternative currency. I have my doubts about that happening, this is true, but I want to point out that the two questions are entirely different.
There's any number of examples fro the past to argue either side of this. Global Crossing for example, very definitely a dotcom inspired bubble of a company. Yet the fibre they laid in such extravagance has indeed since been bought up cheaply and is all now lit. Indeed it may well be aiding me in filing this or you in reading it. The South Sea Company, of the famed Bubble itself, spawned an awful lot of copycats that raised money fro shareholders and never managed anything else. But the South Sea Company itself survived the bubble and actually did some real business over the years.
And the obvious example is the Dutch tulip craze. Yes, there was very definitely a speculative bubble in these bulbs, with, towards the end, fine examples going for the price of a house. All of which collapsed in a matter of weeks and they were worth again what the bulb of a pretty flower is usually worth. Yet the tulip industry survives in Holland to this day and the country is still the HQ of the European market for cut flowers. Tulip bulbs, the business in them, has survived for centuries after the collapse of the speculative bubble.
So my argument is that yes, Bitcoin is in a speculative bubble. But this tells us little to nothing about whether it will eventually become a useful store of wealth or medium of exchange (the two things e normally desire from a currency). That will be determined by whether people find it useful after the speculation and the bubble I claim there is have passed.
