Former Republican congressman Ron Paul blames the Federal Reserve for allowing the controversial digital currency bitcoin to become the biggest financial bubble of all.

Paul warns savvy investors that cryptocurrencies have become an asset that rivals the bubble he sees in stocks.

"I think it's going to continue to do exactly what it's doing. It's going higher and it's going lower," he recently told CNBC's "Futures Now."

"We can look at what's happening now, which to me is a climactic end of QEs," the two-time GOP presidential candidate said.

Bitcoin’s monumental gains this year - its price has soared about 19 times - have spurred caution and alarm among some policymakers.

Bitcoin, the largest of the cryptocurrencies, has been trading above $17,000. Bitcoin has since pared some of the losses and last traded at $16,939, down 4.3 percent for the day.

"I look at the problems we face. I think they're gigantic and people are desperate and looking everywhere," the former Libertarian and Republican Party presidential candidate said.

"Why would they buy bonds that pay negative interest rates? Why would they buy stocks, and say well this time it's different?" the former Republican Congressman from Texas pondered.

"Cryptocurrency is a reflection of the disaster of the monetary dollar system," he said.

Paul warns that cryptocurrencies are in an "exponential bubble" where trying to calculate its real value is extremely difficult.

He warns that there is a real danger that a plunge could soon jolt cryptocurrencies or the stock market.

"They're both big bubbles in the sense that it occurred because there was excessive credit. But if you look at the curves, I think that the cryptocurrency curve looks more threatening," Paul said.

For its part, bitcoin fell more than 10 percent on Wednesday to a one-week low of $15,800 at cryptocurrency exchange Bitstamp, losing almost one- fifth of its value from a peak hit just three days ago.

The digital currency has been sliding since it reached a record high of $19,666 on Sunday, when the exchange giant CME Group launched bitcoin futures, one week after its rival Cboe Global Markets listed the world’s first bitcoin futures, Reuters reported.

“The listing of two bitcoin futures makes it easier for institutional players to trade bitcoins. Futures also enable players to go short on bitcoins, which was difficult without liquid futures,” said Makoto Sakuma, researcher at NLI Research Institute in Tokyo.

Its decline since Sunday is hardly a major correction for digital currency. In November, it tumbled almost 30 percent in four days from $7,888 to $5,555. In September, it fell 40 percent from $4,979 to $2,972.

Many financial professionals have said bitcoin, which now has market capitalisation of about $275 billion, slightly bigger than Visa Inc., is a typical bubble, given how small the actual number of transactions are.

The market is highly inefficient, with bitcoin futures trading much above cash bitcoins while the gaps of price quotes between various exchanges are also very large, they say.

(Newsmax wire services contributed to this report).