Some in the mainstream media would have you believe that most of those investing in Bitcoin are naïve and unsophisticated fools who don't recognize a bubble when they see one.
But that doesn't explain why some big names in venture capital are pouring millions of dollars into the digital currency, or why Wall Street is growing increasingly interested.
According to Bitcoin news site CoinDesk, at least $72 million of venture capital poured into Bitcoin startups just in the first quarter of 2014. As a result, CoinDesk has raised its projection for investments in Bitcoin startups this year from $100 million to $300 million – triple the amount invested in 2013.
And venture capital is just the first wave of Bitcoin investment from major players.
"We're seeing a high level of interest from principals who work at Wall Street firms, traders, portfolio managers, who are investing personally in Bitcoin, and it's my expectation that it's only a matter of time before institutional money starts moving into Bitcoin," said Barry Silbert, chief executive officer of New York trading firm SecondMarket, creator of the Bitcoin Investment Trust hedge fund.
What's notable is that many of those at the forefront of investing in Bitcoin are fairly prominent personalities known for getting ahead of big trends.
Another key Bitcoin investor has been venture capital firm Union Square Ventures, which earned its stripes as an early mover on such companies as Zynga Inc. (Nasdaq: ZNGA), Twitter, and Tumblr.
Last year, Union Square put $5 million into digital wallet company Coinbase.
And then there's Marc Andreessen of the well-respected venture capital firm Andreessen Horowitz. Andreessen, best-known as the founder of Netscape, is one of tech's most outspoken "Bitcoin believers."
Andreessen, whose firm has already invested $50 million in Bitcoin startups, said just a few weeks ago he intends to invest "hundreds of millions" more.
The list of notable names investing in Bitcoin even extends to at least one revered Wall Street veteran – Bill Miller, portfolio manager of the Legg Mason Capital Management Trust.
In a CNBC appearance Thursday, Miller did not say how much he had invested in Bitcoin, only that he was down 20% and remained bullish on the digital currency.
Miller's fund ranked first among The Wall Street Journal's diversified U.S. stock mutual funds with more than $50 million in assets for three straight quarters from late 2012 to mid-2013.
Miller became an investing legend when the Legg Mason Capital Management Value Trust he co-managed beat the S&P 500 index for 15 years straight, from 1991 to 2005.
Clearly, Andreessen, Silbert, Miller and many more like them are convinced that investing in Bitcoin ultimately will pay off in a big way.
They have good reason to think so…
Why So Much Smart Money Is Investing in Bitcoin
About the Author
Dave has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.