Bitcoin is not in a bubble but other digital currencies are "flooding the market with perishable supplies of worthless value," according to the co-founder of financial technology company Glint.
Ben Davies told CNBC that bitcoin does appear to be overinflated but that this obscures the bigger picture.
"Bitcoin is not a bubble, albeit it has all the hallmarks and antecedents that are the precursor to a bubble," he said in an email to CNBC on Monday.
"The term bubble tends to indicate a price no reasonable future outcome can justify. In price terms, bitcoin and altcoins (alternative cryptocurrencies) are in a bubble. In value terms, bitcoin is not."
Davies said that, while the price of bitcoin was based on speculative trade, its value was a different story.
"If you bet against bitcoin, you are betting against the exchange of value afforded by the internet," he said. "The internet exchanges information through various protocols, just as bitcoin conveys an exchange of value of a good or service when it's spent. So if its utility is increasing, the network value will continue to rise."
Bitcoin's price edged up slightly Tuesday morning. The world's largest digital currency was trading at $11,786.81 at 8:02 a.m. London time (3:02 a.m. ET), up around 1 percent for the session, according to CoinDesk data.
A number of big bank executives have referred to bitcoin as a "bubble" due to its sharp rise. The price of the cryptocurrency has shot up more than 1,000 percent since the start of the year.
Tulip mania comparison is 'poor'
Several commentators, including JPMorgan CEO Jamie Dimon, have compared bitcoin to tulip bulbs. Referring to a 17th century phenomenon in the Netherlands, critics have said the cryptocurrency mirrors the price of tulips, which soared to extraordinary highs. The bubble eventually crashed in 1637, resulting in a sharp decline in prices and panic selling.
But Glint's Davies called this a "poor comparison." He said: "The price increases in tulips pale into insignificance compared to the cryptocurrency phenomenon. This doesn't mean bitcoin specifically is in a bubble; however, the other cryptocurrencies are."
Instead, the executive said that alternative digital currencies based on the bitcoin blockchain — which he called an "array of multi-colored variants" — were comparable to the tulip mania phenomenon.
He explained that the mosaic virus — which caused the flowers to turn unusual colors — was similar to alternative cryptocurrencies in the market. Many people are trying to profit from "bastardizing" the original blockchain in a number of ways, such as new digital coin sales called ICOs (initial coin offerings), he added.
"The new supply of tulips cannibalized themselves and likewise the altcoins are cannibalizing themselves. In doing so, they are flooding the market with perishable supplies of worthless value."
Davies' firm lets people make payments electronically — not with bitcoin, but with gold. Users can link a Mastercard debit card to the Glint app to buy goods and services as well as transfer money.
The executive said that bitcoin serves as an "exchange of value afforded by the internet" but does not work as a currency in the way that gold does.