About a half-billion dollars worth of it vanished from an online exchange in Tokyo. A prosecutor in Manhattan arrested the 24-year-old vice chairman of its most prominent trading body on drug-related charges of money laundering. Its founder’s identity remains a mystery, and last year, it shed two-thirds of its value, losing an additional 44% in just the first two weeks of January. In his year-end letter to investors, Warren Buffett’s advice about it was emphatic: “Stay away.”

The digital currency known as bitcoin is only...