Bubble or brave new world? Bitcoin breaks $10,000 barrier
By Sam Reeves
Bitcoin broke through the $10,000 barrier 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 hit a high of $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.
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.
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 October alone. The current market value of Bitcoin is now around $180 billion, according to Coinmarketcap.com, which tracks the market capitalisations of cryptocurrencies. That puts it within touching distance of Coca-Cola, which is worth $195 billion.
But the spectacular rate of growth, which has seen it increase in value from a 2017 low of $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,” warned hedge fund manager Mike Novogratz at a cryptocurrency conference Tuesday in New York.
– ‘Crazy numbers’ –
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, was also presented as proof it was a bad thing.
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.
— Bloomberg News contributed to this report —