The Bitcoin craze is nearing its endgame as common sense starts to catch up, bringing not only financial losses but intellectual embarrassment to its supporters as well, Reuters Breakingviews Economics Editor Edward Hadas writes.

The price of Bitcoin has been intensely volatile for the past two years. Hadas cites the dollar price of the digital currency rising from $5 at the start of last year to $1,200 early this month. By the afternoon of December 18, Wednesday, Beijing time, it had fallen to just a little over $500 after declining by a quarter in the day. The announcement from a Chinese Bitcoin exchange about the government banning new purchases in renminbi fueled the latest drop, the report said.

Although supporters of the Bitcoin contend that the action of authorities was driven by fear of the growth of a currency that was not controlled by an oppressive state, Hadas did not think this was the case. He believes that they saw a "smuggler's paradise" in the Bitcoin which could be used for illegal transactions and a tool to evade capital controls.

The fundamental intellectual flaws in the Bitcoin are at work in the recent price collapse. Although the technology used in generating Bitcoins pledges scarcity which is a very important requirement for value to exist, demand must also be taken into account. The report said distrust of government is one of the similarities shared by Bitcoiners and gold bugs. Unlike gold, however, Bitcoin is not beautiful nor really useful. The intense price swings, on the other hand, also questions the ability of the Bitcoin to serve as a means of exchange. Users need to be assured that currencies will be able to keep their value even for a short time at least, the report said.

The reason why Bitcoin nearly quadrupled in value last month is due to speculation not fundamental value and no good reason exists to own the virtual currency, the report said.