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Bitcoin breaks new records at almost $10,000 a piece

The crypto-currency is now worth more than seven times an ounce of gold

27 November 2017, 2:52pm
(Photo: The Merkle)
(Photo: The Merkle)
Bitcoin has hit new records after surpassing $9,000 and is close to reaching five figures, as investors in the crypto-currency ignore warnings of a “bubble”.

The currency rose to an all-time high of $9,700 on Monday and is now worth more than seven times an ounce of gold, which is traditionally seen as a safe haven. In a rally, bitcoin begun the year at $1,000 and smashed through $5,000 by October.

Analysts said that the decision by the Chicago Mercantile Exchange (CME) to launch bitcoin futures in December fuelled the purchasing, but also warned of the dangers of a speculative bubble building.

Bitcoin has gained more than 50% since the CME announced its decision on 31 October.

Neil Wilson, senior market analyst at ETX Capital, said: “The legitimacy this gives bitcoin as a tradeable asset is very important. The market cap of bitcoin now exceeds that of IBM, Disney [or] McDonald’s.”

The value of the 16.7m bitcoin units in circulation has exceeded $160bn.

Warning of looming pain for bitcoin buyers, Wilson added: “But for traditionalists, it’s hard to fathom. Rather than a commodity or currency, bitcoin is like owning stock in a company that will only ever issue 21m shares and never pay a penny in dividends. The only way it has value is if the next guy is willing to pay you more for it – the greater fool. With no intrinsic value to bitcoin, it’s hard to see this as anything other than a giant speculative bubble.”

Bitcoin is a virtual currency that emerged in the aftermath of the financial crisis. It allows people to bypass banks and traditional payment processes to pay for goods and services. Banks and other financial institutions have been concerned about bitcoin’s early associations with money laundering and online crime, and it has not been adopted by any government.

The price has been volatile.

Bitcoin fell below $3,000 in mid-September, after the Chinese authorities announced a crackdown. To help rein in some of that volatility, CME will not allow the trading of bitcoin futures at prices 20% above or below the settlement price from the previous day.

Hussein Sayed, chief market strategist at online foreign exchange broker FXTM, said bitcoin was showing no signs of slowing down. It is not just retail investors buying the crypto-currency. Many hedge funds have also decided to include it in their portfolios and, according to CNBC, the financial news service, there are over 120 funds investment, devoted to crypto-currencies.

Sayed said it was almost impossible to give the crypto-currency a fair value based on fundamentals, but added that there had been a strong correlation between the price of bitcoin and number of users opening new wallets.

He added: “Given that number of users haven’t exceeded 0.1% of the global population, there’s still more potential for this momentum trade to continue. Whether the price will be justified in the foreseeable future, depends on the adoption and the application of the new currency, but so far it still looks unstoppable.”

The starkest warning has come from the JP Morgan chief executive, Jamie Dimon, who said bitcoin was a fraud that would blow up.

DealToday
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