Bitcoin price zooms through $1,000 as enthusiasm grows

Wed Nov 27, 2013 2:28pm EST
 
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By Wanfeng Zhou

NEW YORK (Reuters) - The price of the digital currency bitcoin soared above $1,000 for the first time on Wednesday, extending a 400 percent surge in less than a month that some see as a growing bubble in an asset that is still a mystery to many.

Bitcoin hit a high of $1,073 on Tokyo-based exchange Mt. Gox, the best-known operator of a bitcoin digital marketplace, compared with just below $900 the previous day.

At the beginning of the month, bitcoin, a prominent digital currency that is not backed by a government or central bank, traded at around $215. The spike in its price has some believing that it has become overvalued in a short period of time, owing to its limited supply and increasing demand.

"A narrow asset class and lots of liquidity is the perfect environment for a rapid burst up in value, and then corrections," said Sebastien Galy, a currency strategist at Societe Generale in New York.

Bitcoin trades 24 hours a day, every day. The supply of the currency, which is "mined" by solving math problems, is limited, and recently stood at 12 million bitcoins, worth about $12.9 billion at recent prices.

Bitcoin is not backed by physical assets and is not run by any person or group. Its value depends on people's confidence in the currency. It has been gaining acceptance by the general public and investment community but has yet to become an accepted form of payment on the websites of major retailers such as Amazon.com.

Earlier in the month, the U.S. Senate held a hearing on virtual currencies, with some officials expressing concern that it is notable for its use in criminal activity and that there is a lack of regulatory oversight.

But bitcoin advocates say last week's Senate hearing gave more legitimacy to the currency, in part fueling the gains.   Continued...

 
One of Bitcoin enthusiast Mike Caldwell's coins in this photo illustration at his office in Sandy, Utah, September 17, 2013. REUTERS/Jim Urquhart