Bit­coin tops US$10,000

Warn­ings mul­ti­ply that the dig­i­tal cur­rency is an as­set bub­ble

The Star Malaysia - StarBiz - - Foreign News -

MADRID: Bit­coin sur­passed US$10,000 for the first time, bring­ing this year’s price surge to more than 10-fold even as warn­ings mul­ti­ply that the largest dig­i­tal cur­rency is an as­set bub­ble.

The eu­pho­ria is bring­ing to the main­stream what was once con­sid­ered the prov­i­dence of com­puter de­vel­op­ers, fu­tur­ists and lib­er­tar­i­ans seek­ing to cre­ate an al­ter­na­tive to cen­tral bank-con­trolled mone­tary sys­tems. While the ac­tual vol­ume of trans­ac­tions con­ducted in cryp­tocur­ren­cies is rel­a­tively small, the op­ti­mism sur­round­ing the tech­nol­ogy con­tin­ues to drive it to new highs.

Bit­coin has risen by more than 50% since Oc­to­ber alone, tak­ing off af­ter de­vel­op­ers agreed to can­cel a tech­nol­ogy up­date that threat­ened to split the dig­i­tal cur­rency. Even as an­a­lysts dis­agree on whether the largest cryp­tocur­rency by mar­ket cap­i­tal­i­sa­tion is truly an as­set, its US$167bil value al­ready ex­ceeds that of about 95% of the S&P 500 In­dex mem­bers.

“This is a bub­ble and there is a lot of froth. This is go­ing to be the big­gest bub­ble of our life­times,” hedge fund man­ager Mike Novo­gratz said at a cryp­tocur­rency con­fer­ence Tues­day in New York.

Novo­gratz, who’s says he be­gan in­vest­ing in bit­coin when it was at US$90, is start­ing a US$500mil fund be­cause of the po­ten­tial for the tech­nol­ogy to even­tu­ally trans­form fi­nan­cial mar­kets.

There’s no agreed au­thor­ity for the price of bit­coin, and quotes can vary sig­nif­i­cantly across ex­changes. In Zim­babwe, where there’s a lack of con­fi­dence in the lo­cal fi­nan­cial sys­tem, the cryp­tocur­rency has traded at a per­sis­tent pre­mium over US$10,000. Vol­umes are also dif­fi­cult to as­sess. Bloomberg pub­lishes a price that draws on sev­eral large bit­coin trad­ing venues. It was at US$10,166.98 as of 12:02pm Tokyo time.

From Wall Street ex­ec­u­tives to ven­ture cap­i­tal­ists, ob­servers have been weigh­ing in, with some more scep­ti­cal than oth­ers as bit­coin’s rise has grown steeper, sweep­ing along in­di­vid­ual in­vestors.

The num­ber of ac­counts at Coin­base, one of the largest plat­forms for trad­ing bit­coin and ri­val ethereum, has al­most tripled to 13 mil­lion in the past year, ac­cord­ing to Be­spoke In­vest­ment Group LLC.

In a move to­ward main­stream in­vest­ing, CME Group Inc has said it plans to start of­fer­ing fu­tures con­tracts for bit­coin, which could be­gin trad­ing in De­cem­ber.

JP Mor­gan Chase & Co, the largest US bank, was weigh­ing last week whether to help clients bet on bit­coin via the pro­posed fu­tures con­tracts, ac­cord­ing to a per­son with knowl­edge of the sit­u­a­tion. The ris­ing pro­file of dig­i­tal cur­ren­cies even saw bit­coin fea­ture in the Se­nate con­fir­ma­tion hear­ing Tues­day for Fed­eral Re­serve chair­man nom­i­nee Jerome Pow­ell, who’s a cur­rent board mem­ber.

An­swer­ing a se­na­tor’s ques­tion, he said that “cryp­tocur­ren­cies are some­thing we mon­i­tor very care­fully,” and that at some point their vol­umes “could mat­ter” for mone­tary pol­icy, though not to­day.

The to­tal mar­ket cap of dig­i­tal cur­ren­cies now sits north of US$300bil, ac­cord­ing to data on Coin­mar­ket­’s web­site.

For Peter Rosen­stre­ich, head of mar­ket strat­egy at on­line trad­ing firm Swis­squote Bank SA, bit­coin’s surge harks back to the sur­prises of the UK ref­er­en­dum on Euro­pean Union mem­ber­ship and pres­i­dent Don­ald Trump’s elec­tion.

“We have un­der­es­ti­mated the pop­ulist move­ments,” he said. “There is grow­ing un­ease on how cen­tral banks and gov­ern­ments are man­ag­ing fiat cur­ren­cies. Or­di­nary peo­ple glob­ally un­der­stand why a de­cen­tralised as­set is the ul­ti­mate safe haven.”

Up and up: While the ac­tual vol­ume of trans­ac­tions con­ducted in cryp­tocur­ren­cies is rel­a­tively small, the op­ti­mism sur­round­ing the tech­nol­ogy con­tin­ues to drive it to new highs. — Reuters

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