Bitcoin yesterday broke through the US$10,000 barrier for the first time as it extends a stratospheric rise that has delighted investors, but sparked fears of a bubble.
The virtual currency hit a high of US$10,903 in Asia, according to Bloomberg News, about 14 times its value at the start of the year.
The breakthrough is the latest in a spectacular run for the online money dubbed “digital gold” by its advocates, which began life in 2009 as a bit of encrypted software supposedly written by an unknown coder with a Japanese-sounding name.
Bitcoin, which was valued at just a few US cents when it was launched, has no legal exchange rate, no central bank backing it and is traded on specialist platforms.
What began as the preserve of computer nerds and financial experts has gained a following among a broader group seeking alternatives to traditional investments, while it has been used to pay for items from a pint in a London pub to a manicure.
However, the virtual currency has attracted as much anger as praise.
The boss of JPMorgan Chase & Co labeled it a fraud, while China has closed down Bitcoin trading platforms and South Korea this week expressed concern it could lead young investors to become embroiled in fraud.
It got a big boost last month when exchange giant CME Group announced it would launch a futures marketplace for bitcoin, which has not been listed on a major bourse before.
The announcement sparked a surge in its value — it has risen 50 percent since last month alone.
The current market value of bitcoin is now about US$180 billion, according to Coinmarketcap.com, which tracks the market capitalizations of cryptocurrencies.
That puts it within touching distance of Coca-Cola, which is worth US$195 billion.
However, the spectacular rate of growth, which has seen it increase in value from a low this year of US$752 in mid-January, has also triggered concerns, with critics noting the currency has suffered wild swings in the past.
“This is a bubble and there is a lot of froth. This is going to be the biggest bubble of our lifetimes,” hedge fund manager Mike Novogratz said at a cryptocurrency conference on Tuesday in New York.
Stephen Innes, a senior trader and market analyst at Oanda Asia Pacific in Singapore, warned of “crazy numbers” and added: “I’m a little bit fearful that retail traders are jumping in under the false guise of this will run on forever.”
“We know things never go in a straight line,” he said.
Other commentators were more positive, saying the unit’s surging popularity would attract cash from traditional investors, such as hedge funds and asset managers.
“I think the momentum is still very much to the upside,” said Kay Van-Petersen, a macro and crypto strategist with Saxo Bank in Singapore.
He said it could still suffer pullbacks, but predicted it would be worth US$50,000 to US$100,000 in the next six to 18 months.
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