Even as bitcoin’s price reaches new record highs, a growing chorus of voices is calling the cryptocurrency’s phenomenal trajectory a bubble and cautioning investors against investing in the cryptocurrency.

Jack Bogle, founder of Vanguard, the world’s first index fund, said investors should “avoid bitcoin like the plague.” To back up his claims, Bogle said bitcoin has no underlying rate of return.

“There is nothing to support bitcoin except the hope that you will sell it to someone for more than you paid for it,” he said, adding that even if bitcoin rose to $20,000 tomorrow, it would not prove that he was wrong. “When it (bitcoin’s price) gets back to $100, we’ll talk,” he said.

In a Bloomberg interview, Nobel Prize winning economist Joseph Stiglitz said bitcoin is a bubble “that’s going to give a lot of people a lot of exciting times as it rides up and then goes down.” Stiglitz says the cryptocurrency is successful only because it is not regulated and helps circumvent existing law. “It doesn’t serve any socially useful function,” he said.

Even billionaire Michael Novogratz, who is planning a $500 million fund devoted to cryptocurrencies, has admitted that “this (crypto) is the biggest bubble of our lifetimes by a long shot.”  

Why Bitcoin Critics May Have A Point  

While bitcoin’s underlying technology - the blockchain - has been lauded for its potential to reinvent industries, the cryptocurrency itself is yet to prove itself as a viable medium of exchange for daily transactions. Verifiable statistics relating to its use in daily transactions are absent, even in countries like Japan, which have legalized cryptocurrencies.

A “socially useful function,” as Stiglitz describes it, is important to justify bitcoin’s rising valuation in the markets. At the same time, bitcoin also fails as a store of value.

Goldman Sachs released a paper earlier this year arguing against the case for bitcoin as a store of value versus gold. In their paper, the firm compared the assets on four characteristics - durability, portability, intrinsic value, unit of account - and found that gold won three times out of four. Without a proven case as a store of value or as a currency, it is difficult to justify the money flowing into bitcoin.

After the cryptocurrency's critics emerged, it crashed by approximately 20% to $9,009 after touching a high of $11,434 yesterday morning. (See also: Bitcoin Price Crosses $11,000 Mark.) 

Should Bitcoin Investors and Traders Be Worried?

Bitcoin’s short life, so far, has been marked by volatility and controversy. But established institutions are beginning to take notice of its existence and are taking steps to legitimize bitcoin trading channels.

For example, CME and CBOE will begin bitcoin futures trading soon. (See also: CME To Launch Bitcoin Futures.)  Hedge funds and investment banks will also begin offering services related to the cryptocurrency. (See also: JPMorgan May Not Rule Out Bitcoin After All.)

Institutional money should have the effect of propelling the cryptocurrency to further highs, according to Nolan Bauerle, director of research at CoinDesk. “If important amounts of money come poking around, they’ll find an even higher price,” Bauerle said in an email interview. “It’s a scarce good after all.”

Bauerle says bitcoin is caught in a “kind of loop” with news cycles. “All news seems to feed demand, which itself creates news and feeds demand,” he said. He says bitcoin’s “fundamental” characteristics - as the world’s digital scarce resource and hedge against monetary policy - will continue to be in play in future price swings for the cryptocurrency.