Massive Bitcoin surge raises fears of bubble

Bitcoin broke through the $10 000 barrier (R137 060) for the first time yesterday as it extends a stratospheric rise that has delighted investors but sparked fears of a bubble.

The virtual currency hit a high of $10 903 in Asia, according to Bloomberg News, about 14 times its value at the start of the year.

The breakthrough is the latest in a spectacular run for the online money dubbed “digital gold” by its advocates, which began life in 2009 as a bit of encrypted software supposedly written by an unknown coder with a Japanese-sounding name.

Bitcoin, which was valued at just a few US cents when it was launched, has no legal exchange rate, no central bank backing it and is traded on specialist platforms.

What began as the preserve of computer nerds and financial experts has gained a following among a broader group seeking alternatives to traditional investments, while it has been used to pay for items from a pint in a London pub to a manicure.

The virtual currency has attracted as much anger as praise, however.

The boss of JP Morgan Chase labelled it a fraud, while China has closed down Bitcoin trading platforms and South Korea expressed concern it could lead young investors to become embroiled in fraud.

It got a boost last month when exchange giant CME Group announced it would launch a futures marketplace for Bitcoin, which has not been listed on a major bourse before.

The announcement sparked a surge in its value — it has risen 50% since last month alone.

The current market value of Bitcoin is now about $180-billion (R25-trillion), according to Coinmarketcap.com, which tracks the market capitalisations of cryptocurrencies.

That puts it within touching distance of Coca-Cola, which is worth $195-billion (R27-trillion).

But the spectacular rate of growth has also triggered concerns, with critics noting the currency has suffered wild swings in the past.

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