Bitcoins are getting even hotter. On Thursday, the overall value of all the bitcoins in circulation hit a record high of over $14 billion. The web-based crypto-currency climbed 5% to its highest levels in three years after more than doubling in price in 2016, according to Reuters.
Bitcoins growing valuable
On the Europe-based Bitstamp exchange, the price of one bitcoin hit $875, the strongest level since January 2014. On Wednesday, the digital currency broke through the $800 mark. At the start of the year, the price of one bitcoin was around $435, and many experts linked the rise of the digital currency with the steady depreciation of the Chinese yuan. According to data, the majority of bitcoin trading is done in China; hence, any hike in demand there has a significant impact on the price, says Reuters.
Also Bitcoin’s rise had been assisted by global political uncertainty and the demonetization in India, said Charles Hayter, founder of data analysis website Cryptocompare.
“If that trend continues, bitcoin is a good thematic play on the fracturing of our global norms as a flight to safety,” the expert said.
Bitcoin has still not reached the peak that it scaled in late 2013. At that time, the digital currency was trading as high as $1,163 on the Bitstamp exchange. However, on Thursday, its “market cap” or total value surpassed the 2013 peak of around $14.01 billion because more bitcoins continue to be added to the system, at a rate of 12.5 every 10 minutes. That puts their total value at about the same as that of an average FTSE 100 company, notes Reuters.
What’s causing the surge this week?
This year, the crypto-currency has behaved like a risk asset, with investors collecting it in times of uncertainty. The price rose around Trump’s surprising election win and the Brexit referendum, notes Business Insider. But what is driving its price this week is not exactly clear, as other risk assets are not following the same trend. For instance, gold has fallen steadily since November.
In an email to BI, Mati Greenspan, a senior market analyst at eToro, says, “With those kind of gigantic swings, this is the most risky asset ever conceived so I certainly would not recommend putting your life savings in it.”
Bitcoin, which was invented by several programmers, is a web-based “cryptocurrency” that can move money across the world anonymously and quickly without any requirement of a central authority. This makes it attractive to those who want to get around capital controls.