Bitcoin soars to all-time high despite claims of a bubble
Bitcoin soared past the $5,000 threshold on Thursday to hit a record high, having started 2017 at $966.
The rise of the cryptocurrency, which has rocketed more than 750% over the past twelve months to become four times more valuable than an ounce of gold, continues to provoke calls of a bubble from those sitting on the sidelines.
Throughout the year, fluctuations in Bitcoin's price had been quite extreme, most notably diving below $3,000 in September after the Chinese government ordered cryptocurrency exchanges to stop trading as concerns that increased levels of consumers joining the market would hurt financial markets elsewhere.
However, shortly after China's decision to ban the cryptocurrency, Bitcoin's price quickly jumped back up again, allegedly due to increased levels of trading in Japan, South Korea and other markets.
Neil Wilson of ETX Capital wondered "who's the greater fool?" - the bitcoin investor who makes a profit or the naysayer who misses out.
But he pointed out that there does seem to be "growing appetite" among all manner of investors to allocate part of their portfolio to Bitcoin as an alternative/complementary safe haven to gold."
Bitcoin and several other cryptocurrencies had shown strong performances in 2017, despite a stark warning in September from JP Morgan chief executive, Jamie Dimon, who said that as there was only a limited market for the currency, referring to its patronage by drug dealers, contract killers and residents of nations like North Korea and Venezuela, that it was only a matter of time until it would "eventually blow up."
"It is worse than tulip bulbs," he said, referring to the infamous 'Tulip Mania' of 17th century Europe, echoing sentiments expressed by the former president of the Dutch Central Bank, Nout Wellink, who joked, "at least then you got a tulip".
Dimon said those investing in bitcoin should be prepared to suffer great losses.
"Don't ask me to short it. It could be at $20,000 before this happens, but it will eventually blow up," he said. "Honestly, I am just shocked that anyone can't see it for what it is."
Kenneth Rogoff, a professor of economics and public policy at Harvard University predicted that although Bitcoin's underlying technology would likely thrive, the cryptocurrency itself was en route for a big crash.
"It is folly to think that Bitcoin will ever be allowed to supplant central bank-issued money," he wrote in an article published by the Guardian on Monday.
"It is one thing for governments to allow small anonymous transactions with virtual currencies; indeed, this would be desirable. But it is an entirely different matter for governments to allow large-scale anonymous payments, which would make it extremely difficult to collect taxes or counter criminal activity."