Is it too late to buy Bitcoin?

We spoke with a Nobel laureate to get some answers.

Right now, the value of a Bitcoin is north of $17,000. Considering that price was around $1,000 at the very start of the year, you can be forgiven for having a vague sense of regret: after all, if you’d bought $100 worth of the cryptocurrency back then, you’d have about $1,700 now if you cashed out today.

The ride has gotten even crazier over the past month or so, with Bitcoin more than doubling in value since mid-November.

In the wake of this recent, wild climb, people are scrambling to get in on the ground floor—or maybe, let’s call it, the third floor—of a new, exciting investment. For our part, we reached out to two experts—economist Robert Shiller of Yale and professor Christian Catalini of MIT—to talk through Bitcoin; what it is, where it’s going, and what we should do about it. What’s below is information, not financial advice. Harness this article however you’d like. We’re not saying invest or not invest, we’re saying be informed before you make any major financial decisions. Let’s hit it:

Is it too late to buy Bitcoin?

The short answer is no one knows. Unless you can time travel, maybe. As the old saying goes—predictions are hard, especially about the future. We asked Robert Shiller, author of the book Irrational Exuberance and a 2013 winner of the Nobel Memorial Prize in Economic Science, what he thought.

“It’s hard to know when the bubble will end,” he says. It’s impossible to know if the price will keep going up, and it’s hard to even guess. We also have no idea if going “short” right now, or betting that the price will decline, will be better than going “long,” or betting that the price will continue to go up over time.

So, unfortunately, the unsatisfying answer is the right one: nobody knows.

Let’s back up. What is Bitcoin?

In short, it’s a cryptocurrency—the phrase “crypto” is a reference to cryptography, which is part of the technology that underpins the system. (Here’s a more thorough Bitcoin explainer.) This digital currency has value in part because some people accept it as a form of payment (the way a dollar has value even though it’s no longer backed by gold), in part because it is scarce (there is a limited supply), and in part because you can exchange Bitcoin you own for dollars through an exchange like Coinbase.

But what advocates like about Bitcoin, and other digital currencies like it, is that it’s not governed by a central authority, like a bank. It’s a peer-to-peer, decentralized network.

“It was conceived as something that could be fully censorship-resistant and operate in a decentralized network without relying on any single trusted intermediary,” says Catalini. In other words, you don’t need PayPal, MasterCard, or Chase for it to function.

That decentralized network is key, as is a system called blockchain, which is a public ledger that records all Bitcoin transactions. This is a visualization of one such transaction; the two long strings of numbers and letters at the top represent the sender and receiver.

“This shared data, this shared ledger, is maintained by every participating node in the network,” Catalini says. “Not only do these nodes maintain it, but they also secure it against an attack.”

Should I invest in Bitcoin instead of other things, like my 401(k)?

Bitcoin is highly volatile, and is thus not a conservative way to build something as essential as retirement. Bitcoin and other cryptocurrencies are so new that the market is still essentially trying to figure out their value. We don’t know what it’ll be like next week, never mind when you near retirement age.

Catalini compares what’s happening now with Bitcoin to people wondering about the “value of the equity in a startup.” As expectations about the future potential of a startup shift, the perceived value of that startup changes too, and can fluctuate wildly. Something similar is happening here.

“The value of Bitcoin depends on whether this network could become a major financial network in the future,” he adds. In short, the more it is perceived to be an important system going forward, the more people want to get into it.

You used the word ‘bubble’ up above. Is this a bubble?

Bitcoin experienced a bubble before. In December 2013, the price climbed above $1,000 before declining to the $200 neighborhood by early 2015. (All prices quoted in this article come from here.)

Today’s Bitcoin situation “has aspects of a bubble in the sense that it’s a contagion,” Shiller says. “Bubbles are periods of contagious excitement about some investable asset that is enhanced by public observations of increases in price, and envy of people who made a lot money so easily.”

While Shiller is worried by some signs he sees—discussions about a Bitcoin bubble is actually one of them—innovation around the currency gives it more credibility, too. For example: the commencement of trading in Bitcoin futures has helped the currency gain legitimacy.

OK, I think I’m going to buy some. But how?

If you want to dip a toe into the turbulent cryptocurrency waters, one major Bitcoin exchange is called Coinbase. You can invest in Bitcoin, or two other cryptocurrencies, Ethereum and Litecoin, through them.

“Don’t put much into it,” Shiller says. “It’s a little bit like going to the casino—maybe you’ll learn something from the experience.”

Said another way: invest money that you can afford to lose.

So you’re saying I should take out a second mortgage on my home to buy Bitcoin?

We are saying the exact opposite of that.

Rob Verger

Rob Vergeris an associate editor at PopSci, where he covers aviation, the military, transportation, outdoor gear and gadgets, and other tech topics. A graduate of Columbia Journalism School, he's also written for The Boston Globe, Newsweek, The Daily Beast, CJR, VICE News, and other publications. Contact the author here.