British economists have warned of a potential bitcoin bubble.

Analysts from Capital Economics have issued a 13-page research note that claims bitcoin does not have a bright long-term future.

The report relates to the best-known of the growing legion of cryptocurrencies – bitcoin, whose dramatic peaks and valleys are the source of media frenzy and intense speculation.

While the blockchain technology underpinning bitcoin is likely to have a bright future well beyond finance, Capital Economics is doubtful that bitcoin will ever replace regular currencies or commodities.

“Claims that cryptocurrencies will replace established fiat currencies are rubbish; our view is that bitcoin is a bubble,” the report argues.

“Indeed, the latest price falls suggest that the bubble is bursting — although with prices still 10 times higher than a year ago, they have a lot further to fall yet.

“Most people are buying bitcoin, not because of a belief in its future as a global currency, but because they expect it to rise in value.

“Accordingly, it has all the hallmarks of a classic speculative bubble, which we expect to burst.”

The report is accessible here (for a fee), and its claims are explained in detail, here.