The head of the Reserve Bank says bitcoin appears to be a "classic" bubble.

Acting Reserve Bank Governor Grant Spencer told TVNZ's Q+A this morning that bitcoin lacked the stability required of useful currency and was a "speculative instrument" like gold.

"It looks remarkably like a bubble forming to me," Spencer said.

"Over the centuries we've seen bubbles and this appears to be a bit of a classic case ... with a bubble you never know how far it's going to go before it comes down."

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"I think digital currency and cryptocurrencies are a real and serious proposition for the future, I think they are part of the future but not the sort we see in bitcoin."

Bitcoin's price is at about US$15,644 ($22,880), down from the $17,000 highs of Friday.

The world's biggest cryptocurrency has surged on expectations that new bitcoin derivatives products expected to begin trading this month will boost mainstream demand.

What is bitcoin?

•The best-known digital currency, or "cryptocurrency", which operates without any central administrator.

•Invented by "Satoshi Nakamoto" — a pseudonym, and possibly a group of people — and released as software in 2009.

•New bitcoin are generated at pre-set intervals, until they reach a limit of 21 million bitcoin on issue.

•As of today, a single bitcoin was worth about $22,880

•Blockchain is the technology behind bitcoin. It is the digital equivalent of an old-fashioned ledger, blockchain uses a network of computers to keep track of who owns bitcoin, and to avoid counterfeiting and double spending. Other uses could include tracking credit card transactions, keeping track of health records, or verifying your identity online.

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Read more: How big is the bitcoin bubble?

Some of the world's biggest brokerages have criticised those plans, telling regulators the contracts have been rushed to market without enough due diligence.

"This is irrational exuberance," Royal Bank of Scotland chairman Howard John Davies said in an interview on Bloomberg TV last week. "This is a very, very unusual market, that shows we're not in a normal two-way trading market."

Coinmarketcap.com puts the value of all bitcoins in circulation at nearly US$244 billion ($357b). The value of bitcoin is greater than that of New Zealand's economy at about $269b, according to World Bank data as of July. The cryptocurrency's market capitalisation is also bigger than Qatar, Kuwait and Hungary.