There’s a reason why bitcoin critics are evoking Tulip Mania as the digital currency’s price soars to new heights.

It’s because the story of the Netherlands’ great tulip bubble of 1637 helps focus the mind on the basic question at the heart of any financial bubble assessment: whether there’s a blatant disconnect between an asset’s price and its fundamental value. There are some decent arguments why bitcoin’s detractors could be wrong. But, either way, anyone hoping to ride this rally higher should think about what constitutes the digital currency’s fundamental value.

Of course, there’s no surefire way to determine fundamental or fair value–notwithstanding the useful benchmarks for doing so in markets such as stocks–especially for something as untested as this. But the lesson of Tulip Mania is that when prices truly get into bubble territory, your gut can be as good a gauge as anything. At its peak, the price for a single tulip bulb in 1637 stood at 10 times the annual income of a skilled Dutch craftsman. Based on that simple, fundamental assessment of the market’s potential, something was clearly amiss.

The highlighted sentence. Incorrect. Gold & Silver before they were money were commodities that had a use value. That was their base fundamental value. Their money value was in addition to their commodity value.

Bitcoin has no commodity value. It has a money value which is enhanced by a speculative component. The money value is going to be very unstable as it will always compete with government fiat money that has one main advantage, it is legal tender. Which simply means that it is a coerced currency. You are forced to use and recognise it as money. Not so with Bitcoin.

The advantage that Bitcoin possesses is that it is untraceable, at least currently. Thus it is a perfect currency for conducting illegal transactions.