Bitcoin soared to a record high of about Sh1.4 million ($14,047.40) on Thursday despite questions about the cryptocurrency’s real value and worries about a dangerous bubble.
Bitcoin received a boost after last week’s announcement by the main US derivatives regulator that it would allow CME Group Inc and CBOE Global Markets to list bitcoin futures contracts.
The move opens the door to added regulation but also more mainstream adoption, as bitcoin futures and other derivatives would make it easier to trade the new asset class.
“Simply the perception in households around the world that the CME and the CBOE are providing legitimacy to bitcoin is really what is driving the massive rally here,” said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments in Toronto.
Bitcoin’s ascent of over 10-fold from below Sh 100,000 ($1,000) at the start of the year has drawn regulatory scrutiny around the world.
Some high profile individuals such as Nobel Prize-winning economist Joseph Stiglitz have said the cryptocurrency should be outlawed.
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“It took a long time to establish the methodology and the way bitcoin was traded. The original appeal came from the fact they were unregulated. However it’s clearly moved out of those shadows and into canter stage,” said Mick McCarthy, CMC Markets’ chief market strategist in Sydney.
“We are in the throes of a bubble market, and one of the characteristics of a bubble market is that there is no way to know when the bubble will burst.”
The current craze for bitcoin, and cryptocurrencies in general, have been likened by some to the 17th century Dutch tulip mania and more recently the dotcom bubble.
“If you look at this sort of pattern it has repeated itself many, many times. The only way it ends is when sentiment shifts and that’s a deeply unpredictable thing,” Cambridge Global Payments’ Schamotta said.
Bitcoin was up 2.94 per cent at $14,030.00 at the Luxembourg-based Bitstamp exchange BTC=BTSP.
“There is a lot of money flowing into bitcoin right now, mostly motivated by ”fear of missing out“ and greed,” said Leonhard Weese, president of the Bitcoin Association of Hong Kong.