Bitcoin value surpasses $10,000 as skeptics warn of bubble
CRYPTOCURRENCY bitcoin has reached a staggering all-time high above US$10,000 on Tuesday on major exchanges and digital currency indexes, including the widely followed Luxembourg-based trading platform BitStamp.
Created in 2009, bitcoin uses encryption and a blockchain database that enables the fast and anonymous transfer of funds outside of a traditional centralized payment system.
It has soared more than 900 percent so far this year, posting the largest gain of all asset classes, amid increased institutional demand for crypto-currencies as financial and mainstream use has expanded.
— GDAX (@GDAX) November 29, 2017
But sceptics say it a classic speculative bubble with no relation to real financial market activity or the economy, most famously JP Morgan boss Jamie Dimon who labelled it a fraud.
“This is a bubble and there is a lot of froth. This is going to be the biggest bubble of our lifetimes,” former macro hedge fund manager at Fortress Investment Group Mike Novogratz said at a cryptocurrency conference Tuesday in New York, as quoted by Bloomberg.
Bitcoin crossed US$10,000 on smaller exchanges such as the CEX.IO exchange, and the crypto-currency index coinmarketcap.com long before it hit the milestone on BitStamp.
At 0245 GMT, it hit a high of US$10,069.12 on BitStamp and was up two percent on the day.
“The price rise is a continuation of a long-term trend which has been driven by the speculative activity in Japan and also with institutional investors dipping their toes into the cryptocurrency market,” said Thomas Glucksmann, head of marketing at Hong Kong exchange Gatecoin.
“The recent surge is just part of that additional element of excitement amongst speculative traders and a growing contingent of liquid traders that have a long-term optimistic view on … this technology.”
Why does Bitcoin keep growing? Because it's time to separate money and state.
— Erik Voorhees (@ErikVoorhees) November 28, 2017
Sol Lederer, blockchain director at US technology company LOOMIA, said this surge will help long-time bitcoiners finally feel vindicated that their currency, which had been ridiculed for years, was at last being taken seriously.
“Bitcoin’s future is still uncertain; it faces the same serious technical challenges it has for years and faces stiff competition from newer, more sophisticated blockchains. But even if it were to crash, it’s apparent that bitcoin is here to stay.”
In some emerging markets, bitcoin had hit well over US$10,000 previously. In Zimbabwe, bitcoin traded at US$17,875 on Monday. Tuesday’s price in Zimbabwe was not available.
In South Korean exchanges, bitcoin was already close to US$11,000 or higher.
It traded at nearly US$11,000 on Tuesday on bithumb after hitting the US$10,000 milestone on Monday. At Coinone, bitcoin traded at more than US$11,700, and at US$11,734 on Korbit.
Bitcoin has been boosted as exchanges such as the CME Group Inc and the Chicago Board Options Exchange announced plans to launch futures contracts for the currency.
“I’m sure there will be a few dips over the next weeks and months as the cryptocurrency market is quite illiquid so there’s bound to be volatility,” Gatecoin’s Glucksmann said.
Novogratz said in a Reuters Investment Summit earlier this month that mainstream institutional investors were about six to eight months from adopting bitcoin.
Many leading bankers, including Credit Suisse chief executive Tidjane Thiam have expressed scepticism about bitcoin.
“From what we can identify, the only reason today to buy or sell Bitcoin is to make money, which is the very definition of speculation and the very definition of a bubble,” Thiam said earlier this month.
Additional reporting by Reuters