Bitcoin rockets above $5,000 to all-time high (updated)
12/10/2017 15:11
(Adds comment, details, background)
By Jemima Kelly
LONDON, Oct 12 (Reuters) - Bitcoin smashed through the
$5,000 barrier for the first time on Thursday BTC=BTSP ,
jumping as much as 8 percent on the day as investors shrugged
off the latest warnings on the risks of buying into the booming
cryptocurrency market.
Bitcoin, the biggest and best-known cryptocurrency, has
chalked up a more than fivefold increase in price this year.
Typically for bitcoin, which at less than nine years old is
still highly volatile and illiquid compared with traditional
currencies and assets, the precise reason for its recent tear
was unclear.
Upcoming splits in its software, reports that Goldman Sachs
is considering offering bitcoin trading, rumours that China
could ease restrictions, and even a political crisis in Spain's
Catalonia region were all cited by market-watchers as reasons
for the rally.
But the main factor could simply be demand from investors
wanting 'in' on a market that has provided gains exceeding those
of any other currency in every year bar one since 2010.
"People are just wanting to be part of it," said Ryan
Nettles, head of FX trading and market strategy at Swiss bank
Swissquote SQN.S , which launched bitcoin trading two months
ago. Nettles said interest had been much higher than anticipated
and has come from banks, hedge funds and brokers.
"The interest really stems from the media hype," he added.
On Wednesday Russian President Vladimir Putin warned of the
"serious risks" surrounding the nascent market, while Russia's
central bank said it would ban cryptocurrency trading websites.
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But that was not enough to put investors off, with bitcoin
rallying around 10 percent since then.
Data released last week from SEMrush, a search engine data
analytics firm, found the price had a 91 percent correlation
with Google searches on bitcoin, suggesting that all news --
whether negative or positive -- drives up demand, even if bad
news can have a temporary negative effect.
Bitcoin almost reached $5,000 at the start of September, but
fell back sharply after the head of Goldman Sachs blasted the
cryptocurrency as a "fraud" and as China forced exchanges to
close down, sparking fears of a broader crackdown.
But after dipping below $3,000 in mid-September, bitcoin has
leapt in value by more than 75 percent in four weeks.
"Bitcoin was designed to operate outside of the influence of
governments and central banks, and is doing exactly that," said
Iqbal Gandham, Managing Director at retail trading app eToro,
which has seen huge increases in cryptocurrency trading volumes.
CRYPTO-RIVALS ALSO RALLY
By 1245 GMT, bitcoin was trading up 8 percent on the day
around $5,200 on Luxembourg-based exchange Bitstamp. BTC=BTSP
Though there have been many warnings about a bitcoin
"bubble", including from European Central Bank Deputy Governor
Vitor Constancio, some say it has much further to climb. But
determining its value is difficult.
"For most currencies there are several accepted
methodologies for estimating relative value, normally based on
macroeconomic fundamentals," said EFG Asset Management's Global
Head of Research, Daniel Murray. "For bitcoin no such
fundamentals exist."
Other cryptocurrencies -- whose prices tend to be highly
correlated to bitcoin -- also rallied. Their total value -- or
market capitalisation -- climbed above $160 billion for the
first time since early September, according to industry website
Coinmarketcap.com.
Two upcoming "forks" in the bitcoin software code, which
will create rival clones of the cryptocurrency, were seen by
some as a reason for the rise in price, which saw a boost after
the "Bitcoin Cash" clone was created at the start of August.
"Investors are seeing the lessons of history in the
up-and-coming forks and hoping for an extra dividend," said
Charles Hayter, co-founder of data analysis website
Cryptocompare, adding that rumours on online forums that China
could reopen exchanges could also be affecting the price.
(Additional reporting by Jamie McGeever; Editing by Catherine
Evans)
((jemima.kelly@thomsonreuters.com; +44)(0)(20 7542 7508;
Reuters Messaging: jemima.kelly.thomsonreuters@reuters.net))
Keywords: GLOBAL MARKETS/BITCOIN