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LONDON: Bitcoin zoomed past $11,000 to hit a record high for the sixth day in a row on Wednesday after gaining more than $1,000 in just 12 hours, stoking concerns that a rapidly swelling bubble could be set to burst in spectacular fashion.
After soaring more than 1,000 per cent since the start of the year, bitcoin rose as much as 15 percent on Wednesday.
It topped $10,000 for the first time in early Asia trading, before surging above $11,000 less than 12 hours later to reach $11,395 on Luxembourg-based Bitstamp, one of the largest and most liquid cryptocurrency exchanges, and then dipping back below $11,000.
Bitcoin’s rapid ascent has led to countless warnings that it has reached bubble territory. But the warnings have had little effect, with dozens of new crypto-hedge funds entering the market and retail investors piling in.
The world’s largest bitcoin wallet provider, San Francisco-based Coinbase, signed up 300,000 new users during the US. Thanksgiving holiday, according to data compiled by Altana cryptocurrency fund manager Alistair Milne. It now counts more than 13m customers.
The evidence suggests that few of the users are buying bitcoin to use it as a means of exchange, but are speculating to increase their capital.
“What’s happening right now has nothing to do with bitcoin’s functionality as a currency this is pure mania thats taken hold,” said Garrick Hileman, a research fellow at the University of Cambridge’s Judge Business School.
“This is very much a bubble that will very much correct itself at some point and people need to be very careful.” Hileman, who last week gave a lecture to the Bank of England on the risks of bitcoin and other cryptocurrencies, also flagged the risk of the whole market collapsing entirely.
“Theres always the possibility that some fundamental cryptographic flaw that we can’t solve craters the whole space, or that regulators unite and decide this represents systemic risk and actually could trigger the next financial crisis,” he said.
Created in 2008, bitcoin uses encryption and a blockchain database that enables the fast and anonymous transfer of funds outside of a conventional centralised payment system.
Published in Dawn, November 30th, 2017
