Bitcoin soars past $5,000 despite bubble fears and Chinese trading ban
The price of bitcoin yesterday smashed through $5,000 to an all-time high. The cryptocurrency rose by more than 10% to $5,311 having started the year at $966. Bitcoin has soared by more than 750% in the past year and is worth four times as much as an ounce of gold.
But the price has been volatile. Bitcoin fell below $3,000 in mid-September after the Chinese authorities announced a crackdown. Beijing ordered cryptocurrency exchanges to stop trading and block new registrations owing to fears that increasing numbers of consumers piling into the bitcoin market could trigger wider financial problems.
Jordan Hiscott, chief trader at Ayondo Markets, said yesterday: “The returns are truly remarkable, especially given the recent ban on bitcoin trading in China, where demand had previously accounted for at least 10% of all global volumes.”
Vladimir Putin called on Tuesday for regulation of cryptocurrencies, saying their use “bears serious risks”, such as money laundering, tax evasion and funding for terrorism. But the Russian president also warned against imposing too many barriers, which appears to have given bitcoin a fillip.
Despite warnings over a bubble, bitcoin is gaining in acceptance. Last month, a London property developer said it would allow its tenants to pay their deposits in bitcoin and accept rent payments in bitcoin by the end of the year.
Two weeks ago, Japan’s government implemented rules that recognise bitcoin as a payment method. Celebrities have also got involved, with the boxer Floyd Mayweather, the socialite Paris Hilton and the actor Jamie Foxx promoting coin offerings.
Using bitcoin allows people to bypass banks and traditional payment processes to pay for goods and services directly. Banks and other financial institutions have been concerned about its associations with money laundering and online crime because transactions take place anonymously.
The soaring value of bitcoin and other cryptocurrencies comes despite growing warnings over a price bubble.
Jamie Dimon, JP Morgan’s chief executive, said bitcoin was a fraud that would ultimately blow up. Speaking last month, he said there was a limited market, arguing bitcoin was only fit for use by drug dealers, murderers and people living in countries such as North Korea. He pledged to sack any of his trader investing in bitcoin, but added that he had been unable to dissuade his daughter from investing.
Kenneth Rogoff, a professor of economics and public policy at Harvard University and a former International Monetary Fund chief economist, has predicted the technology behind cryptocurrencies will thrive, but bitcoin’s price will collapse.
“It is folly to think that bitcoin will ever be allowed to supplant central bank-issued money,” he wrote in the Guardian on Monday. “It is one thing for governments to allow small anonymous transactions with virtual currencies … it is an entirely different matter for governments to allow largescale anonymous payments, which would make it extremely difficult to collect taxes or counter criminal activity.”
Daniel Murray, global head of research at EFG Asset Management, said: “Investors buy [an] asset because they are seduced by the prospect of further rapid gains without necessarily thinking about intrinsic value.”