Is Bitcoin the Biggest Bubble in Human History? Cryptocurrency's value is based entirely on one thing: its scarcity. But how can something that doesn't exist be scarce or plentiful?

The market is finally showing some weakness after a wild post-election stock market run-up, and it's taking Bitcoin with it. At least so far.

I wrote a little about this last month, but did not focus enough on Bitcoin, which everyone is talking about more than ever.

This week a lot of us were amused when Nouriel Roubini of Roubini Macro Associates appeared on Bloomberg Television and said Bitcoin is the "biggest bubble in human history" -- worse than Dutch Tulips, the dot-com crash and on and on. (Personally, I prefer the Beanie Babies comparison.)

Three years ago, Bitcoin was under $400, a price I thought was too high even then. As far as I'm concerned, Bitcoin has no intrinsic value and should be worth nothing. So why does anyone think it's worth thousands (and in some cases, millions) of dollars?

It's the theory of false scarcity. There are a limited number of bitcoins in the world and the usage of blockchain technology has assigned the ownership of each coin to specific wallets owned by individuals. So to take "ownership," I have to use the universal blockchain mechanism, accepted by all as valid, to transfer a coin.

This is an adult form of play money, utilizing a convoluted technology that does not seem to be good for anything besides protecting the conjured coins and making them a scarce "object" with no substance. Hence the "false" part.

There are plenty of technologists and guys smarter than the average bear who are all-in on Bitcoin because they can see a different reality, like Peter Thiel and Max Keiser. A lot of readers tell me I don't "get" Bitcoin, and I'm blowing it by not getting in on the action. What do they see that I do not, and why do they value this scarcity so much that the sky is the limit insofar as the value is concerned?

Scarcity can often be equated to value. The stock market shows how that can work in a bull market. Also, the art market will reflect it with certain dead artists. But there are plenty of scarce artworks worth nothing. And stocks crash all the time no matter what the float.

In fact, the way stock certificates are registered and traded seems a lot like Bitcoin. Each share is registered to a person or thing. And they are scarce. Yet, it can easily be worth nothing.

Bitcoin fanatics are banking on the value of scarcity itself. But the point is that scarcity in and of itself has no value, no matter how much it is protected.

The other big theme of Bitcoin is that it can act as a shadow currency to thwart the prying eyes of governments. Things can be bought and sold "off the books." This worked well for drug purchases on Silk Road and for blackmailing schemes and ransomware. This might have continued to work well if the Bitcoin itself was stable. It's not.

Many of the cryptocurrency promoters are paranoid. It's no coincidence that once Ed Snowden revealed that our government is spending more time spying on the public than we ever could imagine, Bitcoin started to come up in the conversations more and more. People believe Bitcoin is the way out of some imagined, repressive capitalist system of horrors.

The whole phenomenon is a never-ending conversation on media outlets like CNBC. Bitcoin is now part of some funds, and is considered a good investment in a diversified portfolio as far as these folks are concerned.

You may as well recommend people invest in squid ink.

That said, I personally do not see how this is the mother of all bubbles. That's because the public-at-large is not yet "all-in" like they were with the housing bubble. The mechanism to own Bitcoins is too arcane for most. Previous crashes almost always are designed to fleece the public at large.

In other words, Bitcoin will remain in the conversation until the public buys in. Then it will crash and finally nobody will talk about it anymore.