Cryptocurrencies do not belong in any investment portfolio. I say this as a CFA® charterholder with 20 years of experience who understands the underlying math and the economic issues involved.

Analyzing the news coverage suggests that this is one of the craziest financial manias in history. CNBC will quote someone who runs a Bitcoin exchange as an expert saying that Bitcoin will go to 6,000. They forgot the other experts, who don't have a vested interest.

Cryptocurrency prices are going up solely because the current crop of holders has found enough new converts to soak up the supply in hope of further appreciation. When people stop getting converted, the prices will head towards zero. This is the most likely scenario.

Fundamentally, Bitcoin has no value.

Here is why it goes towards zero over the long run: Buying a stock entitles you to a share of the cash that is earned from the intellectual property rights, the company's talent, and their customer list. Buying a bond gets an agreement by someone to pay you cash with interest, as long as they are solvent.

Buying Bitcoin gets you nothing but an entry into a ledger that proves someone wasted enough electricity to run trillions of numbers through a formula until they found one that passed. All you can do with this is sell it to someone else. It is like a transferable entry in the International Star Registry or the Who’s Who of Whatever. At least with gold, you have a beautiful and useful piece of metal.

People will tout the wonders of the blockchain for solving all sorts of business problems. How much does a company need to pay cryptocurrency holders to use this technology? Bupkis. Zero. Nada. Zilch. Cero. Nothing. A blockchain is merely a useful type of database, and there are plenty of versions that don't require any cryptocurrency. Much of the software is open source. Why would our economy transfer billions or trillions of dollars of wealth to cryptocurrency speculators who offer nothing in return, as cryptocurrency price targets imply?

Forecasts of great market capitalization defy economic logic

Even if you are libertarian and believe fiat money is eventually going away, there is no reason for any country to pay off Bitcoin speculators or any other cryptocurrency holders to create a new digital currency. They will just create their own blockchain system. People have already created multiple digital currencies such as Ether, Ripple, Stellar, Litecoin, and Dogecoin; more are planned.

Fiat currencies exist for reasons. One must ask, what has changed over the last few decades that has caused governments to rethink the preference for them over alternatives.

Bitcoin acceptance by consumers is unlikely.

Don’t believe the false claims about Bitcoin usage growing or it being a cheap way to transact. Nobody is showing hard statistics to demonstrate this. If it were true, then you would see good numbers and evidence by people other than the flim-flam operators quoted in the press.

Furthermore, one must ask why Bitcoin or a new cryptocurrency would compete successfully as a method of payment. The claims that they are efficient are false. They are based on comparing the retail cost of a transaction that includes marketing, customer service, and rebates to consumers, against a transaction fee for Bitcoin that includes only the validation and time-stamping (“blockchaining”) of the Bitcoin ledger. Furthermore, because most of the costs are paid for by the creation of new Bitcoin, the transaction fee does not even cover these costs!

Some cite countries in political turmoil, like Venezuala, as use cases. Currently, the trading volume originating from such countries is a tiny fraction of the total cryptocurrency volumes. Furthermore, more stable currencies such as dollars are better safe havens. Any capital controls that can be applied to dollars can also be used to keep Bitcoin’s role insignificant.

Unique value proposition is faulty.

There appears to be one unique value proposition of Bitcoin and similar cryptocurrencies---the ability to avoid relying on a government or banking institution. The “trust” issue. The reality is that outside of the group of Bitcoin promoters, a vast majority of people will trust their bank, before they trust some peer-to-peer software they download. Furthermore, most cryptocurrency users transact through shadow banking institutions such as Coinbase and other Bitcoin exchanges. Even those who use the peer-to-peer solutions still must trust the government to run the police, prisons, and militaries armed with nuclear weapons.

It is important that the media get a better understanding of the cryptocurrency phenomena so more members of the public don’t get duped.

Update for 2020: Bitcoin usage for legitimate payments has not grown. The dominant usage is still speculation & illegal activities. Even in the most dysfunctional monetary situation of Venezuela, Bitcoin has had no significant impact. A Jan 17, 2020 Planet Money episode ( https://www.npr.org/2020/01/17/797409100/a-bag-of-bol-vares-and-other-indicators-from-venezuela ) describes how usage of US dollars has become the key safe haven; Bitcoin did not warrant a mention.

A dedicated cult keeps promoting Bitcoin and engineered a bubble that cost many ordinary investors dearly. Perhaps they will produce more bubbles or perhaps they will maintain it as a volatile poorly performing asset until enough get tired of paying the electric bill. Few claim Bitcoin is useful for anything beyond a "store of value" (e.g. buy it because others will).