Fears of a bubble as Bitcoin nears $10,000
Digital currency climbs by 1,000pc in a year...
BITCOIN’S price is poised to smash the $10,000 barrier – sparking fears of a dangerous bubble which could end in huge losses.
The online currency has jumped 20pc in just three days to record highs of $9,700 per unit.
Its price has rocketed from around $1,000 at the start of the year, as online money moved from the preserve of enthusiasts on the internet into the mainstream.
Thousands of amateur traders are now piling in and betting huge amounts, while start-up companies are using bitcoin to raise money and avoid the transparency needed in a stock market float.
But experts fear that the currency has become a vast speculative bubble detached from reality.
Watchdogs across the world have warned there could be a sudden massive crash if the market turns. The market is unregulated in Britain, and the Financial Conduct Authority does not even hold figures on how many are trading.
Economist Ludovic Subran of credit insurer Euler Hermes said: ‘There’s a lot of money to be made. And a lot of money to be lost. We’re seeing more and more people wanting to venture there, but they’re not fully aware of the risk.’
As interest in bitcoin has grown, so has evidence that dubious selfproclaimed trading gurus are using it to flog expensive ‘seminars’.
Senior business figures have said they are worried about the risks, including JP Morgan boss Jamie Dimon who described it as a ‘fraud’. He warned it will ‘eventually blow up’ and added he would fire any employee trading it for being ‘stupid’.
And the FCA has warned punters against betting on price moves using so- called contracts for difference trades, saying they are ‘at risk of suffering significant losses and potentially losing more than you have invested’. Economist Nouriel Roubini, who predicted the financial crisis, has described the fad for online currency as a ‘giant speculative bubble’ which is bound to end in disaster.
He said: ‘This is neither a serious method of payment nor a good way to store capital. The bitcoin feeds on itself.
‘There are no fundamental reasons for its price to reach such levels.’
Roubini said the lack of regulation made the currency popular with crime gangs looking to launder money.
These warnings have done nothing to dampen enthusiasm, whipped up by celebrities who have endorsed online currencies.
Boxer Floyd Mayweather, actor Jamie Foxx and reality TV star Paris Hilton have all tweeted their support for bitcoin.
Football manager Harry Redknapp – who has previously claimed he doesn’t know what an email is or how to send a text message – tweeted support for a lesser-known currency called electroneum.
Watchdogs around the world are starting to take action on bitcoin trades out of fears that it is being used to fund crime and that vulnerable people are being lured into gambling away their savings.