The price of bitcoin, the world’s best-known cryptocurrency, has smashed through $5,000 to a new all-time high.
Bitcoin is now trading at $5,186 compared with $966 at the start of the year. The digital currency has soared 750% in the past year, and is now worth four times as much as an ounce of gold.
But the price has been volatile. Bitcoin plummeted below $3,000 in mid-September after Chinese authorities announced a crackdown on the digital currency. Beijing ordered cryptocurrency exchanges to stop trading and block new registrations, due to fears that increasing number of consumers piling into the market could prompt wider financial problems.
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 bitcoin’s associations with money laundering and online crime.
The soaring value of bitcoin and other cryptocurrencies comes despite growing warnings over a price bubble.
The starkest warning came from JP Morgan boss Jamie Dimon, who said bitcoin was a fraud that will ultimately blow up. He said last month there was only a limited market for the digital currency, arguing it was only fit for use by drug dealers, murderers and people living in countries such as DPRK.
Kenneth Rogoff, professor of economics and public policy at Harvard University and a former IMF chief economist, has predicted that the technology behind cryptocurrencies will thrive but that the price of bitcoin will collapse.
Rogoff wrote in the Guardian this week: “It is folly to think that bitcoin will ever be allowed to supplant central-bank-issued money.
“It is one thing for governments to allow small anonymous transactions with virtual currencies; indeed, this would be desirable. But it is an entirely different matter for governments to allow large-scale anonymous payments, which would make it extremely difficult to collect taxes or counter criminal activity.”
Despite the warnings, Japan’s government has implemented rules that recognise bitcoin as a payment method, and India and Sweden are considering their own virtual currencies. Celebrities have also got involved, with the boxer Floyd Mayweather, the socialite Paris Hilton and the actor Jamie Foxx promoting coin offerings.
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