In Greek mythology, the Sirens were dangerous creatures who lured nearby sailors with their enchanting music and singing voices to shipwreck on the rocky coast of their island. Odysseus (or in Latin, Ulysses), legendary Greek king of Ithaca and the hero of Homer's epic poem the Odyssey, was curious as to what the Sirens sang to him, and so he had all of his sailors plug their ears with beeswax and tie him to the mast of the ship. He ordered his men to leave him tied tightly to the mast, no matter how much he might beg. When he heard their beautiful song, he ordered the sailors to untie him, but they bound him tighter.

In 2021, the siren songs of cryptocurrencies can be heard loud and clear. The manic rush into Bitcoin et al over the past couple of years has resulted in an advance so large and fast that it surpasses John Law's Mississippi Scheme frenzy of 1719. If Bitcoin really does turn out to be a bubble, it will be the biggest in history.

But is it a bubble? The definition of such presumes that it is a fleeting appreciation in the price of an asset that is eventually seen to be completely unwarranted. Believers in Bitcoin point to the fact that it has appreciated over a decade, coming back after each crash. Non-believers say that just means the last decade has been the bubble, not just the last year.

Mainstream financial companies are increasingly attracted to crypto-assets and more guesses of Bitcoin's "fundamental value" are appearing. The latest comes from BCA Research, founded as the "Bank Credit Analyst" by Elliott wave expert A. Hamilton Bolton in the 1940s. Taking the view that Bitcoin should be regarded as the digital version of Gold because it is a pure anti-fiat currency play, BCA Research seeks to value Bitcoin based on the size of the market and its relative volatility to Gold. The estimate is that one Bitcoin is "worth" 120,000 U.S. dollars.

We take the view that something is "worth" whatever it sells at on the open market, and it may well be the case that the mania is not over. One warning that we are cognizant of at the moment, though, is that the public listing of Coinbase, the cryptocurrency exchange, might signify a high-water mark. The last time such a "coming of age" event happened was back in December 2017 with the launch of Bitcoin futures. That coincided with a significant peak in the price.

Will the Coinbase public listing turn out the same? Strap me to that mast, lads!

*Chart updated on May 24 to indicate Bitcoin’s recent low

London-based Murray Gunn is Head of Global Research at Elliott Wave International (EWI). He worked as a fund manager in global bonds, currencies, and stocks, including long posts at Standard Life Investments and the Abu Dhabi Investment Authority. He then joined HSBC Bank as Head of Technical Analysis. Murray is the author of Trading Regime Analysis (Wiley, 2009) and a contributor to Socionomic Studies of Society and Culture (Socionomics Institute Press, 2017). You can read his regular commentary in Elliott Wave International’s Global Market Perspective, The European Short Term Update, Interest Rates & Currency Pro Services, and on deflation.com.