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Bitcoin is the emperors new clothes of financial commodities. Its been prancing up and down money street with nothing on for years, despite the fact that lots of thoroughly sensible people have been playing the role of the boy in the fablewho says ere, ees got nuffink on.

Does the fact that the cryptocurrency has endured two major crashes in the space of just three days signal a turning of the tide? The tipping point at which it runs back into the palace in search of a robe accompanied by a hail of stones from its victims?

Ive been waiting for it to happen. It almost always does when people put together a load of old cobblersand tout them as hot investments. Remember collateralised debt obligations or CDOs? They were created by the packaging up of dodgy mortgages that had been mis-sold to poor people, which were given a fancy sounding name so they could be sold around the world to people who should have known better.

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When sufficient numbers of them realised that CDOs were wearing the emperors new clothes the result was near global financial meltdown that was only narrowly averted courtesy of great wads of taxpayers cash.

The popping of Bitcoins bubble isnt likely to lead to something quite so dramatic, although therell be a lot of pain. There always is. Youll certainly find it high up on the worry lists of most regulators, who will kept very busy dealing with the aftermath.

On 3 January, 2009, the genesis block of bitcoin appeared. It came less than a year after the pseudonymous creator Satoshi Nakamoto detailed the cryptocurrency in a paper titled 'Bitcoin: A peer-to-Peer Electronic Cash System'

Reuters

On 22 May, 2010, the first ever real-world bitcoin transaction took place. Lazlo Hanyecz bought two pizzas for 10,000 bitcoins the equivalent of $90 million at today's prices

Lazlo Hanyecz

Bitcoin soon gained notoriety for its use on the dark web. The Silk Road marketplace, established in 2011, was the first of hundreds of sites to offer illegal drugs and services in exchange for bitcoin

On 29 October, 2013, the first ever bitcoin ATM was installed in a coffee shop in Vancouver, Canada. The machine allowed people to exchange bitcoins for cash

REUTERS/Dimitris Michalakis

The world's biggest bitcoin exchange, MtGox, filed for bankruptcy in February 2014 after losing almost 750,000 of its customers bitcoins. At the time, this was around 7 per cent of all bitcoins and the market inevitably crashed

Getty Images

In 2015, Australian police raided the home of Craig Wright after the entrepreneur claimed he was Satoshi Nakamoto. He later rescinded the claim

Getty Images

On 1 August, 2017, an unresolvable dispute within the bitcoin community saw the network split. The fork of bitcoin's underlying blockchain technology spawned a new cryptocurrency: Bitcoin cash

REUTERS

Towards the end of 2017, the price of bitcoin surged to almost $20,000. This represented a 1,300 per cent increase from its price at the start of the year

Reuters

On 3 January, 2009, the genesis block of bitcoin appeared. It came less than a year after the pseudonymous creator Satoshi Nakamoto detailed the cryptocurrency in a paper titled 'Bitcoin: A peer-to-Peer Electronic Cash System'

Reuters

On 22 May, 2010, the first ever real-world bitcoin transaction took place. Lazlo Hanyecz bought two pizzas for 10,000 bitcoins the equivalent of $90 million at today's prices

Lazlo Hanyecz

Bitcoin soon gained notoriety for its use on the dark web. The Silk Road marketplace, established in 2011, was the first of hundreds of sites to offer illegal drugs and services in exchange for bitcoin

On 29 October, 2013, the first ever bitcoin ATM was installed in a coffee shop in Vancouver, Canada. The machine allowed people to exchange bitcoins for cash

REUTERS/Dimitris Michalakis

The world's biggest bitcoin exchange, MtGox, filed for bankruptcy in February 2014 after losing almost 750,000 of its customers bitcoins. At the time, this was around 7 per cent of all bitcoins and the market inevitably crashed

Getty Images

In 2015, Australian police raided the home of Craig Wright after the entrepreneur claimed he was Satoshi Nakamoto. He later rescinded the claim

Getty Images

On 1 August, 2017, an unresolvable dispute within the bitcoin community saw the network split. The fork of bitcoin's underlying blockchain technology spawned a new cryptocurrency: Bitcoin cash

REUTERS

Towards the end of 2017, the price of bitcoin surged to almost $20,000. This represented a 1,300 per cent increase from its price at the start of the year

Reuters

The odds strongly favour it blowing up at some point because it always does. These things have been happening since the 17th century when people got wildly over excited by tulips during the Dutch golden age. Economic historians could probably point you in the direction of even earlier instances.

The thing about Bitcoin is there isnt even a bulb to put in the ground from which something pretty should grow.

As my colleague Hamish McRae wrote last year, it fails every test to be considered alongside what we commonly understand as money. Its a highly speculative investment commodity with nothing behind it other than sentiment.

A share is clothed in the earnings stream delivered by the products sold by the issuing company. A real currency is dressed in the prospects of the economy that uses it, and the willingness of a central bank to deploy its reserves to support it.

What is cryptocurrency and the technology behind bitcoin and its rivals?

They thus have a notional floor (although the bottom can still fall out which is why countries and companies go bust).

Bitcoin has nothing. Zip. And yet sentiment is a powerful thing. Already there have been articles aimed at boosting it by taking about how Bitcoins represents a hot buying opportunity now its lost its legs. They have graphs. They have lots of big, clever sounding words that dont mean very much. I saw one accompanied with a tweet talking about its parabolic upward trend. No, really. To those who look at that and say What on Earth?, what it means as that the person who said it is really really clever and should be taken seriously. The emperors new birthday suit is covered in fancy gold braid. Dont you see it? Get online, the hot investment is now affordable! Buy, buy, buy.

I got a giggle from one talking about the improving fundamentals of Bitcoin.

Thats classic finance speak. The word fundamentals usually refers to the prospects forcorporate earnings, or what a central bank might do to boost a currency (such as raising interest rates). There are lots of analysts paid lots of money to write reports and produce graphs based on how stocks, currencies or commodities (like gold, fine wine or frozen concentrated orange juice) might perform based on their fundamentals.

Bitcoin, however, doesnt have any fundamentals other than the fact that some people think it might go up from here because its relatively tightly-held and maybe the big the sellers have all been flushed out.

And you know what? It will go up if the herdputs enough money down.

Its happened before and it will keep happening until it doesnt. At which point it will leave a trail of tears behind it and the worlds regulators will be prodded into writing reports about why they didnt shut the thing down (theyd probably like to if they could find a way to do it) before the punters got hurt. People will get very cross. Fingers will be pointed. But no one will go to jail.

No one will so much as a slap on the wrist. And well all move on to the next one of these.

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Bitcoin has crashed again little wonder as it fails every test to be considered a currency - The Independent