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Bubble or brave new world? Bitcoin breaks $11,000 barrier

/ 06:54 AM November 30, 2017

This file photo taken on June 20, 2014, shows an entrance of La Maison du Bitcoin in Paris.
Bitcoin broke the US$10,000 barrier for first time on November 29, 2017. AFP

NEW YORK, United States — Bitcoin surged above $11,000 for the first time on Wednesday as it extends a stratospheric rise that has delighted investors but sparked fears of a bubble.

The virtual currency achieved its first landmark of a historic day early in the Asian trading session, breaching $10,000 for the first time, according to Bloomberg News figures.

The surged continued and it got as high as $11,434 before tumbling to $9,643 near 1930 GMT, a drop of 15 percent in just a few hours.

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The cryptocurrency started the year at just $1,000, and as recently as mid-October was trading at $5,000.

The rise in recent weeks has been spurred in part by a late October announcement by the Chicago Mercantile Exchange to launch a futures marketplace for bitcoin. The tech-heavy Nasdaq exchange also is planning to launch bitcoin futures trading next year, according to press reports Wednesday.

With the latest rise, the overall value of bitcoin globally is 180 billion, according to the site coinmarketcap.com.

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 broader following among those seeking alternatives to traditional investments, and now can be used to pay for a pint in a London pub or a manicure, as well as to invest in startup ventures.

The virtual currency has attracted as much anger as praise, however.

The boss of JP Morgan Chase labelled 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.

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‘Crazy numbers’

Critics note 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,” warned hedge fund manager Mike Novogratz at a cryptocurrency conference Tuesday in New York.

Stephen Innes, of forex broker Oanda 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.”

But other commentators were more positive, saying the unit’s surging popularity will attract cash from traditional investors, such as hedge funds and asset managers.

“I think the momentum is still very much to the upside,” Kay Van-Petersen, macro and crypto strategist with Saxo Bank in Singapore, told AFP.

He said it could still suffer pullbacks, but predicted it would be worth $50,000 to $100,000 in the next six to 18 months.

Transactions happen when heavily encrypted codes are passed across a computer network.

Bitcoin and other virtual currencies use blockchain, which records transactions that are updated in real time on an online ledger and maintained by a network of computers.

But it has not been without controversy.

In one of the most high-profile scandals, major Tokyo-based Bitcoin exchange MtGox collapsed in 2014 after admitting that 850,000 coins — worth around $480 million at the time — had disappeared from its vaults.

Bitcoin’s use on the underground Silk Road website, where users could use it to buy drugs and guns, also raised suspicions about the virtual money.

While analysts expect the currency to suffer falls, they are betting it will prosper in the long term and see the CME launch as the next big test.

“If it survives the CME, there is no reason why it won’t continue to rise higher,” Greg McKenna, chief market strategist at AxiTrader, told AFP. /cbb

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TAGS: Bitcoin, Business, coinmarketcap.com, cryptocurrency, NASDAQ, technology, virtual currency
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