Stephen Gandel is a Bloomberg Gadfly columnist covering equity markets. He was previously a deputy digital editor for Fortune and an economics blogger at Time. He has also covered finance and the housing market.

Even compared with some extreme bubbles, bitcoins, which continued its climb toward $10,000 Monday afternoon, look bloated.

Take dot-com stocks, which were the biggest bubble of the past few decades, and likely the largest in stock market history. At the height of the dot-com stock bubble, the technology-heavy Nasdaq stock index had a price-to-earnings ratio of 175. In the past year, bitcoins have generated transaction fees of nearly $219 million. And at $9,600 a piece, the total value of all bitcoins -- their market cap -- now tops $155 billion. That gives bitcoins the equivalent of a trailing P/E ratio of 708. That means based on valuation, bitcoins are four times more expensive than dot-com stocks were at the height of their bubble.

A Bigger Bubble
Bitcoins are now four times as expensive as dot-com stocks were at their height
Source: Bloomberg, Blockchain.info, Birinyi Associates, Multpl.com
The P/E of real estate is price-to-rent, and price-to-transaction-fees for bitcoins.

Valuation, though, is not what pops bubbles. Supply does. The dot-com bubble, like all bubbles, was driven by the fact that there were relatively few publicly traded internet stocks in the mid-1990s, just as investors were getting excited about them. So prices of the stocks that were public soared. Companies not actually in the internet business added ".com" to their names, or announced a web strategy, and those stocks rose as well. But from 1997 to 2000, there were $44 billion in initial public offerings of new dot-com stocks. Eventually the supply of dot-com companies became large and dubious enough that the bubble burst and the hot air holding up all the stocks rushed out.

The same will happen with bitcoin. The question is when. The combined market value of all digital currencies is just $300 billion. As my colleague David Fickling pointed out, that relatively tiny market cap of bitcoin compared with other asset classes means that a small amount of money coming out of say U.S. stocks, which have a market cap of more than $20 trillion, could send the price of bitcoin soaring. Just a 5 percentage point shift away from gold and into bitcoin could drive the price of the digital currency up another by another 33 percent. But it's not clear that the people who want the protection of owning gold would be comfortable with bitcoin instead. The percentage of stock investors interested or able to invest their 401(k) in bitcoin is likely small as well, though surely, as in all bubbles, growing.

Reach for the Skies
Bitcoin has increased nearly tenfold in price so far this year
Source: Bloomberg

Scarcity is what bitcoin believers think they have going for them. The supply of bitcoins is supposed to max out at just 21 million, though in reality it's likely to effectively grow much larger than that. But while the supply of bitcoins may be fixed, the supply of ways to invest in them and other cyrptocurrencies is certainly not. Earlier this year, a fork in the bitcoin blockchain, similar to what happens in a stock split, created bitcoin cash, which now has  a market value of nearly $28 billion. Bitcoin gold, another fork created spinoff, has a market cap of about $6 billion. That's not quite the $44 billion in dot-com IPOs, but it's getting close. On top of that, ethereum, a bitcoin rival, has a market cap of $46 billion. Not to mention the hundreds of digital currency coins that have been launched this year. Coinmarketcap.com now lists 1,322 cryptocurrencies or offshoots on its website. There are also a number of companies that are looking to develop products based on the blockchain, bitcoin's underlying technology. They will certainly like to sell stock to eager investors as well.

But the big surge of bitcoin investment possibilities is coming soon. Last month, the CME Group said it would begin trading futures contracts based on bitcoins as early as mid-December. And once the bitcoin futures are trading, bitcoin ETFs will not be far behind. All of those investment options do serve to mainstream bitcoins as both an invest option and as a currency. That is in part what bitcoin speculators are betting on right now. But as the river of ways to invest in cryptocurrencies widens, the flood that has lifted the price of the bitcoin will surely recede, and, as always, much faster than people expect.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Stephen Gandel in New York at sgandel2@bloomberg.net

To contact the editor responsible for this story:
Daniel Moss at dmoss@bloomberg.net