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When it comes to the long-term outlook for bitcoin, I stand shoulder to shoulder with Jamie Dimon, the irascible chief of JPMorgan Chase, who thinks the cryptocurrency is a fraud. But when it comes to the short-term prognosis, I think his daughter has a point. She apparently purchased a few bitcoins, much to her dad's chagrin, and is now rubbing her cryptocurrency profits in the face of her famous banker father. Kids, I tell you.

But Dimon the Younger is likely to continue to be right for the immediate future. This will not be for any deep fundamental reason, but simply because bitcoin provides the ideal ingredients for a monumental investing bubble.

The digital darling has soared more than 400% this year and possesses the two most important qualities for inflaming investors' desire. The first is the potential for promoters to tell a great story around the investment. This is easiest when most people don't really understand what they're buying. Bitcoin is perfect in this regard. Ask most people to explain its underlying blockchain technology, and they'll stammer and look at the ceiling. But they're still eager to buy, because they keep reading stories about how bitcoin and blockchain are going to revolutionize the world.

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The second essential quality for an investment bubble is the potential for a lot of financial middlemen to make a lot of money from the rising price. Right now, the usual suspects are stampeding into the cryptocurrency arena, looking for ways to cash in on investors' lust for bitcoin. More than 120 cryptocurrency-focused hedge funds have magically popped into existence. Frank Giustra, the Vancouver-based veteran mining promoter, recently turned his energies from peddling junior gold plays to mining bitcoin. Goldman Sachs is rumoured to be thinking about setting up a bitcoin-trading operation, while numerous groups are striving to overcome legal hurdles and launch bitcoin ETFs.

It brings back memories of the dot-com bubble of the 1990s, when everybody from pet food companies to wedding organizers suddenly announced that, you know, when they sat down and thought about it, they were actually Internet companies at heart. Back then, the addition of  ".com" to a company's name could send its share price soaring. Today, repeated mention of blockchain can accomplish the same thing.

It takes a while for these investing fads to play out. I give bitcoin two years before reality reasserts itself.

But what is that reality? Let's start by observing that, no matter what cryptocurrency gurus tell you, it's difficult to get rich simply by whipping up your own money. Bitcoin enthusiasts prattle on about the ability of their favourite creation to function as a public transactions register, independent of any central authority. Unfortunately, though, creating a nifty cryptographic protocol doesn't amount to grounds for a currency—at least not if you assume that one essential function of a currency is to act as a store of value. With no backing in either government support or precious metals, bitcoin has nothing to anchor its price.

Well, actually, it does have one solid source of support. It comes from the dark economy—tax evaders, smugglers, drug merchants and the like. For their purposes, the murky, hard-to-track world of cryptocurrencies is ideal because it's difficult for authorities to know who is on either end of a transaction. In August, the Australian Criminal Intelligence Commission warned that "virtual currencies, such as bitcoin, are increasingly being used by serious and organized crime groups, as they are a form of currency that can be sold anonymously online."

This sets up an interesting clash of wills. Bitcoin, if it continues to grow, will inevitably attract the attention of authorities, who will have every reason to crack down on its use. That, if nothing else, is likely to put limits on bitcoin's rise.

But that's talking long term. Before then, we're likely to see promoters invent more and more outlandish ways to retail the craze. The launch of a bitcoin ETF, if it happens, will just intensify the speculative fever. For now, anyway, Jamie Dimon's daughter will continue to have bragging rights at the family dinner table.

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