Bit­coin soars past $5,000 de­spite bub­ble fears and Chi­nese trad­ing ban

The Guardian - - FINANCIAL - Ju­lia Kollewe

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.”

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.