The price of a single bitcoin crosses $10,000 on some exchanges.
Digital gold. The new tulip mania. A virtual currency.
Whatever you want to call it, bitcoin is on an extraordinary run, with the price of a single bitcoin crossing $10,000 on some exchanges for the first time Monday — less than two months after it crossed $5,000 for the first time.
It is a bull market with few precedents in recent investing history.
The price has been pushed up by a flood of new buyers from around the world who think they have spotted a new kind of investment that could ultimately compete with gold as a place to store money outside the control of companies and governments.
Lots of skeptics
The skyrocketing price has brought forth no shortage of skeptics, from Jamie Dimon, CEO of JP Morgan Chase, to Warren Buffett, who have variously called it a fraud, a bubble and a Ponzi scheme.
The untethered price increase has, to a degree, proved their point, suggesting that this is an investment tied to few realworld fundamentals.
But each time skeptics have come forward, investors have defied them and bought more bitcoins at higher prices. On Sunday, more than $5 billion was traded on bitcoin exchanges, according to the data site Coinmarketcap.com — a greater volume than what many U.S. stock exchanges see on a normal day.
Believers in the bitcoin technology, which is backed by a new kind of computer network, have argued that what we are seeing is the formation of a new asset class that could join stocks, bonds and physical commodities in the investment portfolios of ordinary people.
If this is a new digital gold, today’s extraordinary prices still leave the total bitcoin supply in the world at a value that is only one sixtieth of all the real gold in the world.
But even aficionados have been dumbstruck by just how quickly the price has gone up in recent months. One trending comment on the Reddit social network put it this way: “This is officially madness. I am going to prepare myself for a large correction.”
The people who have been pushing up the price have not just been the libertarian-minded programmers who helped bitcoin survive its rocky first seven years, after the mysterious creator Satoshi Nakamoto released it in 2009.
South Korea and Japan
In recent months, trading among ordinary investors has taken off in South Korea and Japan. It was on Korean exchanges where the bitcoin price first hit $10,000 on Monday. On U.S. exchanges, the price was Monday around $9,700.
Hedge funds have also been clamoring to get a piece of the action. More than 100 hedge funds invest only in bitcoin and other virtual currencies.
In many places, this trading is happening on exchanges with little regulatory oversight or transparency. This has given rise to fears that a problem at one of the exchanges could trigger a panicked run on bitcoin, something that is not unlikely given the relative inexperience of many new investors.