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THE PRICE OF bitcoin surged through $10,000 yesterday, adding to its ten-fold jump in value this year and fueling a debate as to whether the virtual currency is gaining mainstream acceptance or is merely a bubble waiting to burst.
But as soon as bitcoin went through $10,000, it surged past $11,000, only to plummet from those lofty levels.
The cost of buying one bitcoin as measured by the website Coindesk was hovering around $9,800, and was as low as $9,300 yesterday afternoon.
Currently, it’s sitting at about $9,500.
The price of one bitcoin had been roughly $1,000 at the beginning of the year.
The vertiginous rise in the price of bitcoin and other virtual currencies this year has divided the financial community on their merits and whether – or when – the value might come crashing back down.
The CEO of JPMorgan Chase has called bitcoin a “fraud,” as it is not based on anything other than software code and is not backed by any monetary authority.
Other executives, including International Monetary Fund chief Christine Lagarde, say virtual currencies should not be dismissed and could have useful applications, such as a means of payment in countries with unstable currencies.
Some countries, like China, have tried to stifle bitcoin exchanges. But in a move that gave further credibility to the virtual currency, the US exchange operator CME Group said last month that it plans to open a futures market for the currency before the end of the year, if it can get approval from regulators.
Bitcoin was created about a decade ago as an alternative to government-issued currencies. Transactions allow anonymity, which has made it popular with people who want to keep their financial activity, and their identities, private.
The digital coins are created by so-called “miners”, who operate computer farms that verify other users’ transactions by solving complex mathematical puzzles. These miners receive bitcoin in exchange. Bitcoin can be converted to cash when deposited into accounts at prices set in online trading.
Whereas virtual currencies were initially used primarily as a method of payment, in recent months they have become a hot investment among speculators.
Daniele Bianchi, an assistant professor of finance at the Warwick Business School in England, says that the price increases are due to rising demand but also to the fact that the supply of bitcoins is kept fixed. There are currently only 21 million that can be mined in total.
Bianchi also noted that trading in bitcoin is becoming more professional and open to the general public. He believes virtual currencies are “here to stay” and expects the price to rise higher still.
“The increasing demand pressure from investors and speculators makes the case for an even further increase in bitcoin prices in the near future,” he said.
Others are far more skeptical.
Neil Wilson, a senior market analyst at ETX Capital in London, says bitcoin is “following the playbook for a speculative bubble to the letter.”
A new market enjoys a boom when professional investors start entering the market. That’s followed by euphoria as others rush in to partake in the gains. Wilson says bitcoin could rise a lot further, but says it is merely a question of when, not if, the bubble bursts.
“This sort of thing never, ever lasts,” he said.
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“JPMorgan Chase” calling something a fraud….hahaha…..funniest thing I have heard all week…..
@Johnnathan Biskalero: nobody can lie better than a politician and nobody knows fraud better than a banker
Let me assure you that this is not one of those shady pyramid schemes you’ve been hearing about. No sir. Our model is the trapezoid….
@Fergus Sheahan:
Like all ponzi schemes it relies entirely on investor confidence to keep growing. Once that disappears (as it invariably does with all bubbles) it will crash as it’s effectively worthless, having no underlying assets.
The only question is when that will happen.
@Avina Laaf: Like gold – at the end of the day, it’s just a piece of inanimate metal. The only value it had is it’s rarity, and the fact that it’s purity can be validated. Like bitcoins. The only thing that can make it crash is algorithmic failure, and it’s such a pure volatile tradable commodity, there can be no options market either, which increases its security. Ethereum on the other hand has the interference of humans (with hard reboots), so that fits the Ponzi model better. This surge and drop was just early investors cashing out some.
@Gulliver Foyle:
Gold is gold – it’s a desirable physical commodity that you can hold in your hand. It’s not for nothing that currencies were traditionally backed up by gold reserves.
Bitcoin is, well, a series of I’s and 0’s in cyberspace that ultimately has no underlying inherent value.
The only thing keeping it going is investor confidence- the belief that because you paid to buy it, someone else will be prepared to pay to buy it from you down the line sometime.
Google carbon credit investing to see how bitcoin is likely to end.
@Avina Laaf:
I don’t profess to understand the basis of bitcoin or other crypto currencies.
But what is the underlying asset for the Euro in your pocket?
Or, even more analogous, the euros in your bank account that are also simply a series of 1s and 0s in the banking system’s computers?
One difference is that euros can be easily created by the ECB (quantitative easing) making each euro in our pocket less valuable – this seems to not be the case with bitcoin whereby the total supply is systemically kept finite.
@Avina Laaf: old saying
If you can’t stand in front of it and defend it, you don’t own it and probably never did.
@Avina Laaf: Please learn about it.
Because you would trust the CEO of Jp Morgan, who privately happens to have invested heavily in Bitcoin. It may well fail as a currency but I speculate it will survive in the long run as a commodity. The real magic worth investing in is the technology behind bitcoin, which is know as ‘Blockchain’. Bet now if you think Bitcoin will reach €100k by 2030.
@Arthur O’Neill:
If his personal wealth is ‘heavily invested’ in bitcoin, what does he possibly have to gain by calling it a fraud? He should be talking it up.
@Avina Laaf: economics 101. So he can buy the dip.
@Arthur O’Neill: Jamie Dimon is the only fraud here. The big banks are scared shitless of decentralised cryptocurrencies.
@James Wond:
Economics 101 – investor confidence is crucial to stock price.
@James Wond:
Did Gerald Ratner intend to buy the dip too?
@Avina Laaf: you do know they bought some right after saying it was fraud?
“This sort of thing never lasts”
Bitcoin is the first of its kind so can’t be compared to any other thing
@Natalie May: history littered with failed attempts at new currencies. Google e-gold, Fiat currencies, diocletians new money, could go on and on…All pyramids, all based in hype, all crashed
@Natalie May: not the first of its kind at all. Its just the first ‘ promise’ currency to go digital. A bitcoin is no different to a South Sea Share, it has arbitrary value and has no wealth producing capacity of its own. Therefore, for wealth purposes, it’s only a battery, not a generator. It would be better for all if investment went into jobs, infrastructure, food, energy and all the other things that the world needs.
@Natalie May: Yep, follow world crypto network guys on youtube. Tone vays & Jimmy song the best
CEO of JP Morgan? We better listen up: I’m sure he’s a trustworthy fellow.
Nearly 5.8 billion ounces of gold in the world each worth $1300. If bitcoin even takes only 5% of that market as a store of value each bitcoin will be worth $22,500. And that is not taking into account what it will take from other markets such as remittances and hedge funds.
@John Cassidy:
How can it be a ‘store of value’ when it has no underlying value apart from a string of I’s and 0’s?
@Avina Laaf: Anything can have value as long as there is concensus among a significant group of people that it has value. The same goes for gold and FIAT currency. In fact, I would have more faith in bitcoin because its value cannot be manipulated by government. Its supply of 21 million cannot be changed while FIAT can be through quantitive easing and interest rate adjustments etc.
@Eamon: Exactly, and that’s what frightens them and that’s healthy.
@Avina Laaf: Its value comes from its ease of use, anonymity, lack of control by any organisation to name a few. What exactly is the value of those pieces of paper in your pocket? Look up FIAT currency and have a look at Yugoslavia circa 1990 when the currency devalued X2.5 times every day to the point where people were carrying around 500,000,000,000 Dinar notes to buy groceries. Crypto currencies are here to stay. The growth will slow sharply and they will overvalue at some stage but we aren’t there yet, not by a long shot. Word of advice to anyone with a few bob lying around. Buy some Bitcoin, your return will be staggering. Or leave it in the bank and think of what you’ll do with your 0.5% return per year. Im off to close some positions at 75% profit.
@Avina Laaf: “How can it be a ‘store of value’ when it has no underlying value apart from a string of I’s and 0’s?” Is that not also true now for what we call ‘real’ money? How much of the worlds transactions are actually nothing more than just transferring zeros from one account to another?
@Eamon Kissane:
I agree, as long as people continue to believe it has value then it will have value.
The problem is that Bitcoin is entirely dependent on that confidence, and if it is ever shaken it could rapidly spiral to complete evaporation as Bitcoin has no underlying intrinsic worth. All the ingredients are there for a classic market bubble.
Think of ‘The Emporer’s New Clothes.’
@Neil Mcdonough:
I agree – since we abandoned the ‘gold standard’ the entire financial system is vulnerable to spectacular crash.
@Avina Laaf: every currency/store of value is dependant on confidence. So nothing new there then.
@Avina Laaf: The same can be said of any currency. Look what happened in Argentina, Venezuela, Zimbabwe and the Weimar Republic in Germany. No currency has an underlying intrinsic worth. It has worth if the masses decide it has worth. Which is happening to Bitcoin. You know Bitcoin has been around for 9 years and has seen meteoric rises several times. This will keep happening for decades to come.
@Eamon Kissane:
Think about your post. As I said above, I agree it will continue to have worth as long as people believe it has worth, but it has nothing to back it up once people lose confidence, in much the same way that people lost confidence in the currencies of Zimbabwe, Argentina etc. as they had nothing to back them up (with the underlying economies being in crisis).
Stronger economies don’t suffer from currency crashes in the same way – why do you think that is?
It is amazing that we use and trust perception reserve currencies. Today paper and digital banking is in real terms completely worthless. The switch from metal reserve (of which there was never enough to fund all the promissory cash notes) to perception reserve was an unbelievable stunt by the banking cartels. Of course our politicians and citizens are so fearful and blackmailed by the no money in the atms threat that they keep their heads in the sand.
On the surface you see bitcoin, once you dig deeper into the space and see the other projects using the blockchain and the possible applications for this technology in the future. Then you will see why it is valued at such a price. Don’t write it off based on news about it being used for drugs and it’s all just speculation. You will get left behind, there is a massive opportunity here and one which we will never probably see again. Forget about facebook and Instagram for a while, lift you head up from your phone and get involved.
I hear Aldi carrot soft toys are going for 3k on ebay…
@PhillyVanilli: I must get on this Aldi Carrot-coin fast!
Whom ever the author of this article is, was 24 hours late with the pricing quotes made. Don’t underestimate this Currency and Tech, it’s been about for 8 years and has many fake copy cats but the big Corps are getting into the tech and it irritates Central Banks. Remember more crime and scams are undertaken using Cash, and the Big Banks are often fined for money laundering but no execs end up behind bars. Anglo !
I think Ethereum has way more potential long term…
It’s called profit taking, now institutional investors are involved will be more common, when prices rises at perceived peak then traders sell to realise profit, triggering a price fall, and they buy back at lower price.
Happens I’m company shares and commodities every day, no big mystery.
Bitcoin is a pyramid scheme, only question is has it reached its peak or will more nave investors be roped in before crash. Once one big institutional investor dumps all holdings race will begin for others to sell and price collapse will be spectacular. Alot of nice investors will get badly burned.
@ginger tomatoes i9: Would you or your industry lose out if Bitcoin collapsed?
The volatility really makes a nonsense of holding this as a store of value
@alphanautica: disregarding the 1100% increase in value?
Bitcoin is Gold 2.0…..However more than central banks offshoot of Bitcoin……Bitcoin Cash might be biggest problem for Bitcoin….
@Gulliver Foyle: that’s just an explosive change in price, nothing to do with value.
@alphanautica: ride the waves.
People on these things dismissing it as imaginary money. I read about it first and thought like CD and anyone could copy it etc and so I dismissed it.
It wasn’t until afterwards, reading about the blockchain, the mining behind it how it works etc that I understood.
I dismissed it at €12, €30, and €60. At €60 I figured it had gone too expensive and would fall. It went all the way up to. €1000 then fell right back down to €150.
It was at about €300 I started buying in. Put a serious amount of cash into. Cashed out some but if i had held everything it would be worth €2.5m at todays prices.
Sitting on a lot less now but I expect it to go up over time.
@James Wond: also bitcoin itself has some serious issues. Id look into ETH and bitcoin cash which are about €380 and €1180 at time of comment. I expect both to double in price in less than 12 months.
Bitcoin will end up as a store of value (digital gold) because of it’s finite supply and because like gold, it has to be mined. Also, it is becoming too expensive to use bitcoin as a currency because of increasing mining fees which will result in most people holding it as a long term investment. Once the institutional investors put their obscene wealth into Bitcoin (the herd is coming), 1 Bitcoin will be worth roughly €500,000 within 5 years.
Bitcoin Cash, Dash, Litecoin, Vertcoin etc will compete with each other in the digital peer to peer transaction market place but Bitcoin Core will always be the daddy. The millionaires of this generation will be computer nerds and anti establishment libertarians, how cool is that :D Maybe there is hope for humanity after all.
Nothing new here, this is how cryptos move…
Anyone got a few of these up and running ?
https://www.ebay.ie/itm/2x-BITMAIN-Antminer-S9s-PSUs-Brand-New/192381371447?hash=item2ccad2c437:g:1dUAAOSw9mpaHKOX
When BC price was low @ less than 100$, it wasn’t worth the effort as you were spending more on electricity than you were making on bitcoin. But now, makes a whole lot of sense. there’s still 25 Million BC’s to be found.
@Declan Mannix: there is a little under 5 million left to be mined and it won’t be until the year 2140 until the last one is. Don’t know where you got 25 million left to be found from
@Declan Mannix: steer clear, don’t waste your money! Bitmain purposely delay shipping of orders until ROI drops through the floor. The amount of unhappy customers on their twitter feed is astonishing. A right scam! September ’17 orders only shipping now!
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