Financial markets are frothier than a millennial's 3-D latte. Investors are scrambling to throw money at Argentina, Vice Media and George Clooney's tequila. Only the crypto-currency craze seems to give us comfort there are worse bubbles out there.
The latest warning against digital currencies comes from Aberdeen Asset Management's top venture capitalist, Peter Denious. He blames a feeding frenzy of speculation for the explosion in prices and new coins."
A lot of lessons will be learned and a lot of money will be lost, before a lot of money can be made," he told Bloomberg News. "It's a gold-rush mentality."
Denious is right to say that the market is speculative and unsustainable. Despite recent price wobbles, Bitcoin has almost tripled year-to-date, to $2,677. Its closest rival, Ether, is now worth more than 40 times its end-2016 level of $8.
This isn't because people are using crypto-currencies to buy homes or cars, or because regulators suddenly like them. It's seen as a way to make money.
It's hard, though, to separate the crypto craze from worries about regulated public markets and the real economy after a decade of ultra-cheap central-bank cash.
Talk of a bubble permeates every aspect of today's financial markets. Bank of America research offered up several signs of "Wall Street excess" on Friday:
- Argentina's over-subscribed 100-year bond;
- Facebook's market capitalization now exceeds that of the entire MSCI India index;
- Volatility in the U.S. Treasury market is near an all-time low.
Bitcoin wasn't mentioned once. That makes it harder for the mud thrown at crypto-currencies to stick. Even Fidelity's CEO and John McAfee are mining bitcoins in this market.
The mind-boggling returns of crypto-currencies also reflect a desire to escape public market bubbles rather than just emulate them.
If bonds are the old world's safe haven, Bitcoin is the millennial generation's apocalypse insurance. Crypto-currencies are marketed as a direct expression of opposition to central-bank and government policy, far more so than gold.
Just as low yields push wealthy investors to take bigger risks -- like buying Argentinian debt -- some people see Bitcoin as an escape from financial repression and instability.
That's why Venezuela, where demand for digital coins is soaring amid triple-digit inflation, currency devaluation and political crisis, has one of the highest potentials for bitcoin adoption in the world, according to the London School of Economics. The other top country is -- you guessed it -- Argentina. Monetary experiments beget technological ones.
This doesn't mean that there are purely rational explanations for the actual price of crypto-currencies today, tomorrow or yesterday. If the bubble bursts, investors will have to lower their expectations as to what Bitcoin and its ilk can actually achieve without rampant speculation and illicit activity.
But the more worrying scenario is that political unease about central bankers and wealth inequality will help to funnel more money into crypto-currencies.
Societe Generale's Albert Edwards reckons citizens are close to turning on "unelected and virtually unaccountable central bankers" after years of economic crisis and stagnation.
Bitcoin's computer scientists don't deserve to be seen as a better alternative. But if the path out of the financial crisis takes a sudden turn for the worse, it may well be too late.
Both bubbles seem too closely connected for comfort.