This bitcoin boom will end in tears – take it from someone with a long career in economics

It was worth less than 10 US cents in 2010, less than $10 in 2012, but had risen to $750 a year ago and now to $10,000 plus. This is the Zimbabwe dollar in reverse

Bitcoin shot through the $10,000 barrier on Monday and by the time you read this it has probably gone through $11,000 – the last quote I saw was $10,831.75. So let’s make a prediction. A bitcoin is worthless. Its price will crash and everyone who thought they had made fortunes will wake up with sore heads. Trouble is, it may go higher, perhaps much higher, before this happens.

But it will end in tears. The question then is how serious the impact will be on the world economy as a whole.

In this respect, I am (I hope rightly) reasonably optimistic. The first reason for that is that bitcoin is quite small. Right now the total value of all the bitcoin is a bit shy of $200bn. That sounds a lot but actually it is pretty small in terms of the global economy. It is the GDP of Greece. The world economy grows by quite a lot more than that amount every month. Take that out and if there were a serious downturn as a result, the world’s central banks could agree to add that extra cash over a weekend.

So in macro-economic terms, a crash in bitcoin would not matter. But if you were one of those clever people who spotted its potential a year or more ago and did something about it, that outcome would not be a bundle of fun.