Bit­coin rock­ets to all-time high

Nelson Mail - - BUSINESS - JEMIMA KELLY

Bit­coin has smashed through the US$5000 (NZ$7000) bar­rier for the first time, jump­ing as much as 8 per cent as in­vestors shrugged off the lat­est warn­ings on the risks of buy­ing into the boom­ing cryp­tocur­rency mar­ket.

Bit­coin, the big­gest and best-known cryp­tocur­rency, has chalked up a more than five­fold in­crease in price this year.

Typ­i­cally for bit­coin, which at less than 9 years old is still highly volatile and illiq­uid com­pared with tra­di­tional cur­ren­cies and as­sets, the pre­cise rea­son for its re­cent tear was un­clear.

Up­com­ing splits in its soft­ware, re­ports that Gold­man Sachs is con­sid­er­ing of­fer­ing bit­coin trad­ing, ru­mours that China could ease re­stric­tions, and even a po­lit­i­cal cri­sis in Spain’s Cat­alo­nia re­gion were all cited by mar­ket-watch­ers as rea­sons for the rally.

But the main fac­tor could sim­ply be de­mand from in­vestors want­ing in on a mar­ket that has pro­vided gains ex­ceed­ing those of any other cur­rency in ev­ery year bar one since 2010.

‘‘Peo­ple are just want­ing to be part of it,’’ said Ryan Net­tles, head of FX trad­ing and mar­ket strat­egy at Swiss bank Swis­squote, which launched bit­coin trad­ing two months ago.

Net­tles said in­ter­est had been much higher than an­tic­i­pated and has come from banks, hedge funds and bro­kers.

‘‘The in­ter­est re­ally stems from the me­dia hype,’’ he added.

On Wed­nes­day (Thurs­day, NZ time), Rus­sian Pres­i­dent Vladimir Putin warned of the ‘‘se­ri­ous risks’’ sur­round­ing the nascent mar­ket, while Rus­sia’s cen­tral bank said it would ban cryp­tocur­rency trad­ing web­sites.

But that was not enough to put in­vestors off, with bit­coin ral­ly­ing around 10 per cent since then.

Data re­leased last week from SEMrush, a search en­gine data an­a­lyt­ics firm, found the price had a 91 per cent cor­re­la­tion with Google searches on bit­coin, sug­gest­ing that all news drives up de­mand, even if bad news can have a tem­po­rary neg­a­tive ef­fect.

Bit­coin al­most reached US$5000 at the start of Septem­ber, but fell back sharply af­ter the head of Gold­man Sachs blasted the cryp­tocur­rency as a ‘‘fraud’’ and as China forced ex­changes to close down, spark­ing fears of a broader crack­down.

Af­ter dip­ping below US$3000 in midSeptem­ber, bit­coin has leapt in value by more than 75 per cent in four weeks.

‘‘Bit­coin was de­signed to op­er­ate out­side of the in­flu­ence of gov­ern­ments and cen­tral banks, and is do­ing ex­actly that,’’ said Iqbal Gand­ham, man­ag­ing di­rec­tor at re­tail trad­ing app eToro. –Reuters

PHOTO: REUTERS

Bit­coin has risen in value by more than 75 per cent in the past four weeks.

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