But in the case of Bitcoin, there is no source of value whatsoever. The computing power used to mine the Bitcoin is gone once the run has finished and cannot be reused for a more productive purpose. If Bitcoins cease to be accepted in payment for goods and services, their value will be precisely zero.
According to the efficient-markets hypothesis (EMH), which still dominates the analysis of financial markets, this should be impossible. The EMH states that the market value of an asset is equal to the best available estimate of the value of the services or income flows it will generate. In the case of a company stock, this is the discounted value of future earnings. Since Bitcoins do not generate any actual earnings, they must appreciate in value to ensure that people are willing to hold them. But an endless appreciation, with no flow of earnings or liquidation value, is precisely the kind of bubble the EMH says can’t happen.
Quiggin hits the nail on the head with this one. Bitcoin should be called bubblecoin.