Max Keiser -- AMERICA is on the BRINK of COLLAPSE!

Is it a bubble or mania destined for collapse? Or can it beat the odds and become a viable alternative to the dollar?

That's what many are wondering about Bitcoin, the electronic currency which has captured the Internet world's imagination. Many observers have dismissed the e-currency as a passing fad -- a flash in the pan destined to suffer the same fate as break dancing and Beanie Babies. This conclusion is far too simplistic, however. Due to the complexities of the new currency the Bitcoin issue demands a deeper analysis.

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Looking beyond the rhetoric yields a complex series of possibilities for Bitcoin's future. Let's start with the most glaring observation, namely the e-currency's lofty valuation. At its current level, Bitcoin is unquestionably too pricey to be considered as a legitimate alternative to the dollar. The average American quite simply can't afford to own Bitcoins, and few are technologically savvy enough to "mine" them. This is one major obstacle standing in the way of Bitcoin's widespread acceptance.

Bitcoin's ride to stratospheric levels over the past year is reminiscent of the speculative bubble in the gold market -- a bubble which eventually imploded and scared away multitudes of investors. Runaway speculation caused its price to soar from $140 to $266 in only four days in April 2013, only to erase most of those gains a few days later. In October and November Bitcoin's value went parabolic, far exceeding the April run-up. This in turn was followed by a sharp decline in December, followed by another recovery rally (see chart below). Most recently one Bitcoin was quoted as being worth $842.