I did not mean that they are mutually exclusive - maybe I should have formulated myself differently.
I just dont believe in the speculation "bubble" that I hear from many ends, but I certainly agree that most likely some people are in it to make gains on their fiat.
It really depends on one's definition of a bubble. If the connotation is that a crash is imminent, then that's probably not true. If it means that the price is mainly driven by speculative forces and it's much higher than the intrinsic value (as defined by what the supply and demand for actual end users) would justify, then it probably is.
In my view, bitcoin has the potential to become the greatest bubble in human history. It has all the right ingredients. A robust design (with great features such as perfect divisibility), a good fundamental argument for its existence and utility, and most important of all, limited supply by design and no objective valuation method, which means that the price is determined exclusively by supply and demand, which means that it's the perfect candidate for the Greater Fool theory.
Why are the two last characteristics very important? The limited supply is obvious. The lack of objective valuation is almost equally important though. Imagine that bitcoin was like a traditional asset, that was tied to the real economy and generated cash flows. Example of such an asset is a house. It generates cash flows (rents). It can be valued as a multiple of the rents it generates. One can make assumptions about whether the rents will go down or up, the vacancy rate, the maintenance cost, etc. etc., and can derive a valuation for the house. This you can call the intrinsic value. Prices can deviate from that value, as people have different assumptions but they can't deviate too much for too long (you can see it with the recent house bubble bust).
Other assets however, don't generate cash flows and their value depends entirely upon what other people will pay for them. They don't have an intrinsic value (or it's very small compared to their actual price so it can be ignored). Examples of them are unique works of art (eg. a Picasso painting) and gold. The intrinsic value of a Picasso is almost zero, and gold's intrinsic value (as defined by its use for industrial and decorative purposes) is a tiny fraction of its current price. The current price for both of these examples is such because people buy them with the expectation that other people in the future will pay more for them. Their owners don't derive any cash flows or other utility from them (psychological only perhaps?). So how can one value them? Well, because there is no objective way of valuing them, anyone can say whatever they want, and if enough people believe them, it becomes a self-fulfilling prophecy (like a religion). If I say (especially with the "authority" of an auctioneer) that a particular Picasso is worth $5m, lots of rich folk may bid up to and above that amount in order to secure the prized painting. If enough people believe that gold must equal in value to the total US money supply, then every time they expect the latter to grow, they buy gold and the price goes up. The important thing is that the intrinsic value (derived from industry and jewellery use) is small and there's no objective way to measure the additional, investment value. One can say that we should value it at the total of the US money supply, which makes 1 ounce worth around $2000, or the total US$ credit in circulation, which values it at $10000, or the world GDP (value $15000), or global debt (value $50000). Or given that gold is noone's liability any more (since 1971), we should just value it at its intrinsic value (probably around $500). The thing is, given the asymmetry of payoffs between the different estimates/valuations, it pays off to be long, so more people join the long side and the bubble keeps going.
George Soros said a few years ago that gold is the perfect bubble instrument (for these very reasons). I think that bitcoin has even better
potential than gold. Which is why I'm in, albeit at very small part of my assets (~1%), in proportion to what I perceive as its risk. The problem is that unlike gold, the religion is not well formed and could very well collapse. Having potential doesn't mean that it will definitely be realised. If it does, the value of 1 bitcoin could very well exceed $1m (in which case my tiny holdings will suffice). If it fails to catch on as religion (this is the important part), then it could collapse, and I won't shed a tear.
To sum up: 1) the reason I call it a bubble: the price is driven up by people who buy it for investment/speculation (same thing) purposes, and it's way above its intrinsic value and 2) calling it a bubble does not have a negative connotation, it's merely descriptive.
